25 Multiple Choice Questions on Depreciation
1. Depreciation is a process of:
A. Increasing the value of assets over time
B. Allocating the cost of assets to the periods in which they are used✓
C. Reducing the cost of assets over time
D. None of the above
2. Which of the following is not a method of calculating depreciation?
A. Straight-line method
B. Diminishing balance method
C. Sum-of-the-years' digits method
D. Perpetual inventory method✓
3. Depreciation is charged on:
A. Current assets
B. Fixed assets✓
C. Intangible assets
D. All of the above
4. The factor that determines the rate of depreciation under the straight-line method is:
A. The cost of the asset
B. The estimated useful life of the asset
C. The estimated scrap value of the asset
D. All of the above✓
5. The diminishing balance method of depreciation results in:
A. A constant depreciation charge each year
B. A decreasing depreciation charge each year✓
C. An increasing depreciation charge each year
D. None of the above
6. The sum-of-the-years' digits method of depreciation results in:
A. A constant depreciation charge each year
B. A decreasing depreciation charge each year✓
C. An increasing depreciation charge each year
D. None of the above
7. The accumulated depreciation account is:
A. A real account✓
B. A personal account
C. A nominal account
D. None of the above
8. The depreciation expense is recorded in the:
A. Profit and loss account✓
B. Balance sheet
C. Trading account
D. None of the above
9. The carrying value of an asset is calculated as:
A. Cost - Accumulated depreciation✓
B. Cost + Accumulated depreciation
C. Accumulated depreciation - Cost
D. None of the above
10. When an asset is sold at a loss, the difference between the selling price and the carrying value is:
A. Credited to the profit and loss account
B.. Debited to the profit and loss account✓
C. Credited to the accumulated depreciation account
D. Debited to the accumulated depreciation account
11. The straight-line method of depreciation is suitable for assets that:
A. Have a constant rate of consumption✓
B. Have a decreasing rate of consumption
C. Have an increasing rate of consumption
D. None of the above
12. The diminishing balance method of depreciation is suitable for assets that:
A. Have a constant rate of consumption
B. Have a decreasing rate of consumption✓
C. Have an increasing rate of consumption
D. None of the above
13. The sum-of-the-years' digits method of depreciation is suitable for assets that:
A. Have a constant rate of consumption
B. Have a decreasing rate of consumption
C. Have an increasing rate of consumption✓
D. None of the above
14. Depreciation is a process of:
A. Increasing the value of assets over time
B. Allocating the cost of assets to the periods in which they are used✓
C. Reducing the cost of assets over time
D. None of the above
15. Which of the following is not a method of calculating depreciation?
A. Straight-line method
B. Diminishing balance method
C. Sum-of-the-years' digits method
D. Perpetual inventory method✓
16. Depreciation is charged on:
A. Current assets
B. Fixed assets✓
C. Intangible assets
D. All of the above
17. The factor that determines the rate of depreciation under the straight-line method is:
A. The cost of the asset
B. The estimated useful life
of the asset
C. The estimated scrap value of the asset
D. All of the above✓
18. The diminishing balance method of depreciation results in:
A. A constant depreciation charge each year
B. A decreasing depreciation charge each year ✓
C. An increasing depreciation charge each year
D. None of the above
19. The sum-of-the-years' digits method of depreciation results in:
A. A constant depreciation charge each year
B. A decreasing depreciation charge each year ✓
C. An increasing depreciation charge each year
D. None of the above
20. The accumulated depreciation account is:
A. A real account ✓
B. A personal account
C. A nominal account
D. None of the above
21. The depreciation expense is recorded in the:
A. Profit and loss account ✓
B. Balance sheet
C. Trading account
D. None of the above
22. The carrying value of an asset is calculated as:
A. Cost - Accumulated depreciation ✓
B. Cost + Accumulated depreciation
C. Accumulated depreciation - Cost
D. None of the above
23. When an asset is sold at a loss, the difference between the selling price and the carrying value is:
A. Credited to the profit and loss account
B.Debited to the profit and loss account ✓
C. Credited to the accumulated depreciation account
D. Debited to the accumulated depreciation account
24. The straight-line method of depreciation is suitable for assets that:
A. Have a constant rate of consumption ✓
B. Have a decreasing rate of consumption
C. Have an increasing rate of consumption
D. None of the above
25. The diminishing balance method of depreciation is suitable for assets that:
A. Have a constant rate of consumption
B. Have a decreasing rate of consumption ✓
C. Have an increasing rate of consumption
D. None of the above
