Depreciation & Inventory

What is depreciation?

• An entry to write off the cost of non-current asset when it is scrapped.

• A reserve to finance the purchase of future non-current assets.

• A reserve to pay for repairs which increase with the non-current assets's age.

• A system of matching the benefits of using a non-current asset with its cost.

The net book value of assets is obtaining by deducting _______ with accumulated depreciation.

• depreciation

• market value

• percentage of depreciation

• cost

The value of asset recorded in the statement of financial position is at

• cost

• market value

• net book value

• cost plus accumulated depreciation

Inventory is measured by cost of purchase, transfer cost or other costs incurred in bringing the inventory to its present location and condition.

• True

• False

Accounting ethics require that accounting policies, including changes in inventory valuation methods, be applied consistently.

• True

• False

The perpetual inventory system requires that the inflow and outflow of inventory items be recorded systematically and in detail so that the closing inventory value can be derived based on the record.

• True

• False

Under the First In First Out (FIFO) method, the inventory is measured based on movement of inventory on the assumption that the first batch of stock to come in will be the first batch to be sold.

• True

• False