Depreciation BTEC Quiz

What is straight-line depreciation?

• A method of allocating the cost of an asset based on its market value.

• A method of increasing the cost of an asset over its useful life.

• A method of allocating the cost of an asset evenly over its useful life.

• A method of allocating the cost of an asset only in the first year of its useful life.

How is the annual depreciation expense calculated using the straight-line method?

• Cost of the asset multiplied by useful life

• Cost of the asset divided by useful life

• Cost of the asset plus useful life

• Cost of the asset minus useful life

What are the advantages of using straight-line depreciation?

• It has no impact on financial statements

• It makes calculation difficult and expenses unpredictable

• It allows for easy calculation and predictable expenses over time.

• It is only suitable for short-term assets

What are the limitations of straight-line depreciation?

• Limited accuracy in reflecting the actual decrease in value over time.

• Can only be used for tangible assets.

• No impact on the company's financial statements.

• Unlimited accuracy in reflecting the actual decrease in value over time.

What is reducing balance depreciation?

• A method of calculating depreciation where the asset's value decreases by a fixed percentage each year.

• A method of calculating depreciation where the asset's value increases by a fixed percentage each year.

• A method of calculating depreciation where the asset's value remains constant each year.

• A method of calculating depreciation where the asset's value fluctuates based on market conditions.

How is the annual depreciation expense calculated using the reducing balance method?

• By adding a constant depreciation amount to the remaining book value of the asset each year.

• By applying a variable depreciation rate to the original cost of the asset each year.

• By applying a constant depreciation rate to the remaining book value of the asset each year.

• By subtracting the original cost of the asset from the remaining book value each year.

What are the advantages of using reducing balance depreciation?

• Lower depreciation charges in the earlier years of an asset's life

• Higher depreciation charges in the earlier years of an asset's life

• No impact on the depreciation charges over the years

• Reducing the value of the asset at a slower rate

How do you calculate depreciation using the reducing balance method?

• By subtracting a fixed percentage from the remaining book value of the asset each year.

• By applying a fixed percentage to the remaining book value of the asset each year.

• By applying a variable percentage to the remaining book value of the asset each year.

• By adding a fixed percentage to the original cost of the asset each year.

What is the formula for calculating depreciation?

• Cost of Asset / Useful Life of Asset

• Residual Value / Useful Life of Asset

• (Cost of Asset - Residual Value) / Useful Life of Asset

• Cost of Asset + Residual Value

Calculate the depreciation for an asset with a cost of $10,000, a salvage value of $2,000, and a useful life of 5 years using the straight-line method.

• $2,000 per year

• $500 per year

• $1,600 per year

• $3,000 per year