Q. If an asset is purchased for $10,000 with a useful life of 5 years and no salvage value, what is the annual depreciation using the straight-line method?
A.
$1,000
B.
$2,000
C.
$500
D.
$2,500
Solution
The annual depreciation is calculated as (Cost - Salvage Value) / Useful Life = ($10,000 - $0) / 5 = $2,000.
Q. In a case study, a company has an asset with a cost of $50,000, a salvage value of $5,000, and a useful life of 10 years. If using the double declining balance method, what is the first year's depreciation?
A.
$5,000
B.
$10,000
C.
$9,000
D.
$4,500
Solution
First year's depreciation using double declining balance is calculated as (Cost x 2 / Useful Life) = ($50,000 x 2 / 10) = $10,000.
Q. In a case study, a company uses the straight-line method for a machine with a cost of $10,000, a salvage value of $1,000, and a useful life of 5 years. What is the annual depreciation expense?
A.
$1,800
B.
$2,000
C.
$1,500
D.
$1,200
Solution
Annual depreciation expense is calculated as (Cost - Salvage Value) / Useful Life = ($10,000 - $1,000) / 5 = $1,800.
Q. What is the effect of using different depreciation methods on the trial balance?
A.
It affects only the asset accounts.
B.
It affects only the expense accounts.
C.
It affects both asset and expense accounts.
D.
It has no effect on the trial balance.
Solution
Different depreciation methods affect both the asset accounts (accumulated depreciation) and the expense accounts (depreciation expense) on the trial balance.
Correct Answer:
C
— It affects both asset and expense accounts.
Q. What is the main advantage of using the units of production method?
A.
It simplifies accounting records.
B.
It matches expenses with actual usage.
C.
It provides a higher depreciation expense in early years.
D.
It is easier to calculate than other methods.
Solution
The units of production method matches the depreciation expense with the actual usage of the asset, providing a more accurate reflection of its wear and tear.
Correct Answer:
B
— It matches expenses with actual usage.
