WorksheetsActivity 7 - Understanding Depreciation Methods
Total questions: 15
Worksheet time: 8mins
What is depreciation?
The increase in value of an asset over time
The decrease in value of an asset over time
The process of buying new assets
The method of selling old assets
Which method of depreciation spreads the cost of an asset evenly over its useful life?
Double Declining Balance
Straight Line Method
Unit of Production Method
Accelerated Depreciation
In the Double Declining Balance method, the depreciation rate is:
Half of the straight line rate
Double the straight line rate
The same as the straight line rate
Triple the straight line rate
Which method of depreciation is based on the actual usage of the asset?
Straight Line Method
Double Declining Balance
Unit of Production Method
Sum of the Years' Digits
How does depreciation appear in financial statements?
As an asset
As a liability
As an expense
As revenue
What is the impact of depreciation on taxes?
It increases taxable income
It decreases taxable income
It has no impact on taxable income
It doubles taxable income
If an asset has a lifespan of 5 years, how many years will it be depreciated using the straight line method?
2 years
3 years
5 years
10 years
Which of the following is NOT a method of calculating depreciation?
Straight Line Method
Double Declining Balance
Unit of Production Method
Compound Interest Method
What is the main purpose of calculating depreciation?
To increase the value of an asset
To allocate the cost of an asset over its useful life
To sell the asset at a higher price
To determine the market value of an asset
In the Unit of Production method, depreciation is calculated based on:
The number of years the asset is used
The number of units produced by the asset
The initial cost of the asset
The market value of the asset
Which method of depreciation results in higher expenses in the early years of an asset's life?
Straight Line Method
Double Declining Balance
Unit of Production Method
None of the above
What happens to the book value of an asset as it is depreciated?
It increases
It decreases
It remains the same
It doubles
If a machine is expected to produce 100,000 units over its life, and it produces 10,000 units in a year, what fraction of its cost is depreciated that year using the Unit of Production method?
101
51
1001
201
Which of the following is a benefit of using depreciation in accounting?
It helps in tax evasion
It provides a more accurate picture of an asset's value over time
It increases the company's profits
It eliminates the need for financial statements
What is the term for the estimated time period an asset is expected to be used in business operations?
Depreciation Period
Useful Life
Asset Cycle
Depreciation Cycle
