Home » Quizzes » Depreciation, impairments and depletion » Multiple choice questions (MCQs) quiz Depreciation, impairments and depletion Multiple choice questions (MCQs) quiz Posted in: Depreciation, impairments and depletion (quizzes) By: Rashid Javed | Updated on: August 25th, 2024 /16 Chapter: Depreciation, impairments and depletionQuiz type: Multiple choice questions (MCQs) quizNumber of questions: 16Estimated time required: 8 - 10 minutesPassing score: 60%Your result will be displayed at the end of the quiz. 1. Depreciation is a process of: valuation cost allocation pricing justification 2. Cos of the fixed asset – Salvage value = ? Market value Book value Depreciable cost Depreciated cost 3. ABC Company provides the following information:Cost of the equipment: $5,000Salvage value: $500Useful life of equipment: 10 yearsUnder straight line method, the yearly depreciation charge is: $500 $550 $50 $450 Computation:Yearly depreciation charge under straight-line method = ($5,000 - $500)/10 years= $450 4. The cost of a depreciable asset = ? purchase cost + estimated salvage or residual value purchase cost + costs attributable to put the asset for use only purchase cost of the asset current market price of the asset 5. If the estimated useful life of an asset is 10 years, the straight line depreciation rate would be: 0.01% 0.1% 1% 10% Straight-line depreciation rate in percentage = (1/Useful economic life) × 100= (1/10) × 100= 10% 6. Accumulated depreciation account is an example of: contra asset account contra liability account contra equity account expense account 7. The correct journal entry for recording depreciation on equipment is: Accumulated depreciation - equipment Dr. and Depreciation expense - equipment Cr. Accumulated depreciation Dr. and Equipment Cr. Depreciation expense - equipment Dr. and Accumulated depreciation - equipment Cr. Equipment Dr. and Depreciation expense Cr. 8. Under activity method, the depreciation expense for a period is computed on the basis of: estimated useful life book value salvage value asset’s actual activity 9. Consider the following information:Cost of equipment: $150,000Salvage vale of equipment: $10,000No of hours the equipment has been used during the current period: 2,000 hoursEstimated life time hours the equipment will be used: 20,000 hoursEstimated useful life of the equipment in years: 15 yearsBased on the above information, the depreciation on equipment for current period under activity method is: $15,000 $14,000 $9333.33 $10,000 Computation:= [{(Cost – Salvage value)/Estimated life time hours} × Actual hours]= [{($150,000 – $10,000)/20,000 hours} × 2,000 hours]= $14,000 10. The book value of a fixed asset is equal to: Cost - Accumulated depreciation Cost - Salvage value Cost + Salvage value Cost + Accumulated depreciation 11. Consider the following information:Cost of the building: $75,000Accumulated depreciation of building: $27,000Accelerated depreciation rate: 20%Based on the above information, the depreciation expense for the current period is: $15,000 $20,400 $9,600 $7,500 Depreciation:Depreciation charge for the current period = ($75,000 - $27,000) x 0.2= $9,600 12. Which of the following is not based on estimates? Useful life of the asset Salvage value of the asset Life time working hours of the asset Historical cost of the asset 13. Consider the following information:Cost of the asset: $800,000Salvage value of the asset: $50,000Expected useful life of the asset: 5 yearsBased on the above information, the depreciation charge for the first year of asset’s life under sum of years’ digits method would be: $150,000 $250,000 $160,000 $50,000 Computation:Depreciable cost: $800,000 – $50,000 = $750,000Depreciation for the first year: ($750,000/15*) × 5 = $250,000*Sum of years digits: 5 + 4 + 3 + 2 + 1 = 15 14. If the estimated useful life of an asset is 7 years, the sum of years’ digits would be: 15 32 7 28 Computation:Sum of years’ digits: 7 + 6 + 5 + 4 + 3 + 2 + 1 = 28orSum of years’ digits: n(n + 1)/2 = 7(7 + 1)/2 = 56/2 = 28 15. Which of the following is not an accelerated depreciation method? Declining balance method Double declining balance method Straight line method Sum of years' digits method 16. Which of the following is correct about accelerated depreciation methods? Less depreciation in early years and more depreciation in later years of asset's life More depreciation in early years and less depreciation in later years of asset's life Equal depreciation for each year of asset's life None of the a above 0% Restart quiz Next » Help us grow by sharing our content ♡
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