Understanding "Depreciation Methods - Numerical Applications" is crucial for students preparing for various exams. This topic not only forms a significant part of the syllabus but also helps in grasping the financial concepts that are frequently tested. Practicing MCQs and objective questions enhances your exam preparation and boosts your confidence, ensuring you score better in your assessments.
What You Will Practise Here
Different types of depreciation methods: Straight Line, Declining Balance, and Units of Production.
Key formulas for calculating depreciation expenses.
Real-life applications of depreciation in business scenarios.
Understanding the impact of depreciation on financial statements.
Common terms and definitions related to depreciation.
Worked examples illustrating numerical applications of depreciation methods.
Practice questions to reinforce your understanding of the topic.
Exam Relevance
The topic of depreciation methods is frequently featured in CBSE, State Boards, and competitive exams such as NEET and JEE. Students can expect questions that require them to calculate depreciation using various methods, interpret financial data, and apply theoretical knowledge to practical scenarios. Familiarity with common question patterns will greatly aid in effective exam preparation.
Common Mistakes Students Make
Confusing different depreciation methods and their applications.
Miscalculating depreciation expenses due to incorrect formula usage.
Overlooking the significance of residual value in calculations.
Failing to interpret the results of depreciation on financial statements accurately.
FAQs
Question: What are the main depreciation methods I should know for exams? Answer: The main methods include Straight Line, Declining Balance, and Units of Production.
Question: How can I effectively prepare for depreciation-related questions? Answer: Regular practice of MCQs and understanding the underlying concepts will help you prepare effectively.
Now is the time to enhance your understanding of "Depreciation Methods - Numerical Applications". Dive into practice MCQs and test your knowledge to excel in your exams!
Q. A company has a net income of $120,000 and dividends of $30,000. What is the retained earnings at the end of the year?
A.
$90,000
B.
$120,000
C.
$150,000
D.
$180,000
Solution
Retained Earnings = Net Income - Dividends = $120,000 - $30,000 = $90,000.
Q. A company has an inventory of $50,000 at the beginning of the year and purchases an additional $20,000. If the ending inventory is $30,000, what is the cost of goods sold?
Q. A company purchased a machine for $50,000 with a useful life of 5 years and no salvage value. What is the annual depreciation expense using straight-line method?
Q. A company uses the FIFO method for inventory valuation. If it has 100 units at $10 each and purchases 50 units at $12 each, what is the value of 80 units sold?
A.
$1,000
B.
$1,060
C.
$1,080
D.
$1,200
Solution
Value of 80 units sold = (100 units x $10) + (20 units x $12) = $1,000 + $240 = $1,080.
Q. A company uses the units of production method for a machine that produces 100,000 units over its life. If the machine costs $40,000 and has a salvage value of $4,000, what is the depreciation per unit?
A.
$0.36
B.
$0.40
C.
$0.44
D.
$0.50
Solution
Depreciation per unit = (Cost - Salvage Value) / Total Units = ($40,000 - $4,000) / 100,000 = $0.36.
Q. A vehicle costing $30,000 has a useful life of 4 years and a salvage value of $3,000. What is the annual depreciation using the declining balance method at 25%?
A.
$7,500
B.
$6,750
C.
$8,250
D.
$9,000
Solution
Depreciation Expense = Book Value at Beginning of Year x Depreciation Rate. Year 1: $30,000 x 25% = $7,500. Year 2: ($30,000 - $7,500) x 25% = $5,625.
Q. If a company purchased a building for $200,000 and expects it to last 20 years with a salvage value of $20,000, what is the annual straight-line depreciation?
Q. Using the straight-line method, if a company buys a computer for $2,000 with a useful life of 4 years and a salvage value of $200, what is the annual depreciation?
