Depreciation and Disposal of Fixed Assets Quiz

Salvage value is the remaining value of an asset after its useful life.

The straight-line method evenly distributes depreciation expense over the asset's useful life.

Depreciation calculation is based on the cost of the asset and its estimated useful life, not its market value.

Depreciation reduces the carrying amount of a fixed asset over time.

Various methods like straight-line, double-declining balance, and units of production are commonly used.

Depreciation affects the income statement by reducing net income.

Depreciation spreads the cost of an asset over its useful life for accurate financial reporting.

Disposing of an asset means removing it from active use, often due to obsolescence or sale.

Depreciation is a systematic reduction in value over time, while impairment is a sudden, significant decrease in value.

Depreciation reduces taxable income, lowering the amount of tax a company owes.

Book value equals the original cost of the asset minus the total accumulated depreciation.

A fixed asset is fully depreciated when its book value equals zero.

Depreciation expense is a non-cash expense representing the reduction in value of fixed assets over time.

Disposal of a fixed asset affects neither the total assets nor the equity of a company.

Double-declining balance method doubles the straight-line depreciation rate and applies it to the book value.

Double-declining balance method front-loads depreciation, resulting in higher expenses in the early years.