Depreciation and Disposal of Fixed Assets Quiz
Test your knowledge on depreciation of fixed assets. Learn about methods, formulas, and financial impacts with our quiz.
#1
What is salvage value in the context of fixed assets depreciation?
The value of a fixed asset at the time of acquisition
The estimated residual value of a fixed asset at the end of its useful life
The market value of a fixed asset
The maintenance cost of a fixed asset
#2
Which depreciation method evenly allocates the cost of an asset over its useful life?
Straight-line method
Double-declining balance method
Units of production method
Sum-of-the-years-digits method
#3
Which factor does not affect the calculation of depreciation?
Cost of the asset
Useful life
Market value of the asset
Salvage value
#4
What is the effect of depreciation on the carrying amount of a fixed asset?
Increases the carrying amount
Decreases the carrying amount
No effect on the carrying amount
Increases the fair value
#5
Which method is commonly used for calculating depreciation?
Straight-line method
Double-declining balance method
Sum-of-the-years-digits method
All of the above
#6
Which financial statement is impacted by the depreciation of fixed assets?
Income Statement
Balance Sheet
Statement of Cash Flows
None of the above
#7
What is the main purpose of depreciating fixed assets?
To decrease the market value of assets
To allocate the cost of an asset over its useful life
To increase the taxation on assets
To accelerate the wear and tear of assets
#8
What does 'Disposed of' mean in the context of fixed assets?
Retiring an asset from active use
Increasing the value of an asset
Extending the useful life of an asset
Decreasing the depreciation rate of an asset
#9
What is the difference between impairment and depreciation?
Impairment is a sudden decrease in asset value, while depreciation is a gradual loss of value over time.
Depreciation is related to tangible assets, while impairment is related to intangible assets.
Impairment is not considered an accounting concept, while depreciation is.
Depreciation is only applicable to financial assets, while impairment applies to physical assets.
#10
What is the tax effect of depreciation?
Increases taxable income
Decreases taxable income
No impact on taxable income
Postpones tax payments to a future date
#11
What is the formula for calculating book value of a fixed asset?
Cost of the asset - Accumulated depreciation
Cost of the asset / Useful life
Salvage value + Accumulated depreciation
Cost of the asset * Depreciation rate
#12
When is a fixed asset considered fully depreciated?
When its book value is equal to its cost
When its book value is zero
When its useful life is over
When its salvage value is reached
#13
Which of the following is a non-cash expense related to fixed assets?
Interest expense
Amortization expense
Depreciation expense
Operating expense
#14
What is the impact of disposal of a fixed asset on the accounting equation?
Increases assets and equity
Decreases assets and equity
No impact on assets and equity
Increases liabilities
#15
What is the formula for the double-declining balance method of depreciation?
Depreciation expense = (Cost - Accumulated depreciation) / Useful life
Depreciation expense = (2 / Useful life) * Book value at the beginning of the period
Depreciation expense = (Book value at the beginning of the period / Useful life) * 2
Depreciation expense = Cost / (Useful life * 2)
#16
What is the main drawback of using the double-declining balance method?
It does not account for salvage value.
It results in uneven depreciation expenses over time.
It is too complex for practical use.
It is not accepted by accounting standards.
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