WorksheetsIB Business Management - Depreciation Quiz (HL only)
Total questions: 14
Worksheet time: 5mins
What is depreciation?
The increase in the value of an asset over time
The process of allocating the cost of an asset over its useful life
The total cost of an asset when purchased
The accounting procedure to sell an asset
The straight-line method of depreciation assumes that:
The asset’s value decreases at a constant rate over time
Depreciation is based on the asset's usage
The asset’s value decreases more rapidly in the first few years
The asset is used unevenly throughout its life
In the straight-line method, the depreciation expense in the P&L Account is:
The same amount each year
Dependent on the number of units used
Calculated by multiplying the cost of the asset by its expected usage
Based on the market value of the asset each year
The formula to calculate annual depreciation under the straight-line method is:
(Initial Cost – Residual value) ÷ Useful life
(Initial Cost + Residual Value) ÷ Useful life
Initial Cost × Residual Value
Initial Cost ÷ Useful life
Which of the following is an advantage of the straight-line method of depreciation?
Simplicity and ease of calculation
Reflects the actual usage of the asset
Provides tax benefits in the early years
Matches expenses with revenue more accurately
Which of the following is the most appropriate method of depreciation for an asset that is used at a steady rate throughout its life?
Straight-line method
Units of production method
Reducing balance method
Double declining balance method
In the units of production method, depreciation expense is calculated based on:
The asset's usage or number of units produced
A fixed percentage of the asset’s initial cost
The total cost of the asset divided by its useful life
The age of the asset
The formula to calculate depreciation per unit under the units of production method is:
(Initial Cost – Residual Value) ÷ Total estimated units of production
(Initial Cost + Residual Value) ÷ Useful life
(Initial Cost ÷ Useful life) × Units produced
Total cost of production ÷ Useful life
Which of the following is true about the units of production method?
Depreciation expense remains the same regardless of usage
Depreciation is based on the actual usage of the asset each period
The method assumes that assets wear out evenly over time
If a machine costs $10,000, has a Residual Value of $1,000, and is expected to produce 100,000 units during its useful life, what is the depreciation per unit under the units of production method?
$0.09
$0.10
$9
$1.00
A company buys a machine for $5,000 with an estimated residual value of $500 and an expected useful life of 10,000 units. If the machine produces 2,000 units in the first year, what is the depreciation expense for that year under the units of production method?
$900
$800
$850
$950
Which of the following is a disadvantage of using the units of production method?
It is easy to apply
It requires an estimate of total units of production
It does not account for changes in asset performance over time
It is suitable for assets with a uniform usage pattern
In which scenario would the units of production method of depreciation be the most appropriate?
A building that is used consistently over time
A vehicle that is used for delivery with varying levels of usage each month
Office equipment that has a fixed depreciation rate
What is the primary difference between the straight-line and units of production methods of depreciation?
The straight-line method is based on the asset’s usage, while the units of production method is based on time
The straight-line method allocates the same depreciation each year, while the units of production method varies with usage
The straight-line method is more complex than the units of production method
The straight-line method involves estimating Residual Value, while the units of production method does not
