#1
Which of the following is an example of a tangible asset?
Building
ExplanationTangible assets are physical assets that can be touched and felt, such as buildings.
#2
Which of the following factors does NOT affect the choice of depreciation method?
Asset's market value
ExplanationThe asset's market value doesn't affect the choice of depreciation method.
#3
Which of the following is NOT a depreciation method?
SLAM
ExplanationSLAM is not a recognized depreciation method.
#4
What does the term 'depreciation' refer to in the context of asset valuation?
Decrease in asset value over time
ExplanationDepreciation signifies the reduction in asset value over time.
#5
Which of the following depreciation methods is often used for assets with a long and predictable useful life?
Straight-line depreciation
ExplanationStraight-line depreciation suits assets with stable, predictable lives.
#6
Which depreciation method allocates an equal amount of depreciation expense to each period of the asset's useful life?
Straight-line depreciation
ExplanationStraight-line depreciation evenly spreads depreciation expense over the asset's useful life.
#7
What is the formula to calculate book value of an asset?
Purchase price - Accumulated depreciation
ExplanationBook value equals the purchase price minus accumulated depreciation.
#8
Which of the following methods results in higher depreciation expense in the earlier years of an asset's life?
Double-declining balance depreciation
ExplanationDouble-declining balance depreciation front-loads depreciation expense.
#9
Which depreciation method is based on the assumption that an asset depreciates more in its early years and less in its later years?
Double-declining balance depreciation
ExplanationDouble-declining balance depreciation assumes accelerated depreciation.
#10
What does the term 'salvage value' refer to in asset valuation?
The amount for which the asset can be sold at the end of its useful life
ExplanationSalvage value is the residual value of an asset at the end of its useful life.
#11
Which depreciation method is often used for assets like vehicles and machinery, where usage varies significantly each year?
Units-of-production depreciation
ExplanationUnits-of-production depreciation suits assets with fluctuating usage.
#12
Which depreciation method considers the asset's expected usage in determining depreciation expense?
Units-of-production depreciation
ExplanationUnits-of-production depreciation accounts for actual usage in calculating depreciation.
#13
What is the main advantage of the double-declining balance depreciation method?
It results in higher depreciation expense in earlier years, reflecting the asset's actual decline in value
ExplanationDouble-declining balance depreciation mirrors an asset's actual decline.
#14
What is the primary drawback of using the sum-of-the-years'-digits (SOYD) depreciation method?
It results in an inconsistent pattern of depreciation expenses
ExplanationSOYD depreciation leads to irregular depreciation expenses.
#15
What is the main limitation of the straight-line depreciation method?
It does not consider an asset's actual usage
ExplanationStraight-line depreciation disregards actual asset usage.
#16
What is the main advantage of the double-declining balance depreciation method over the straight-line method?
It allocates higher depreciation expense in earlier years, reflecting the asset's actual decline in value
ExplanationDouble-declining balance depreciation front-loads depreciation, better reflecting asset value decline.