Depreciation MCQs
Which of the following is NOT a method of calculating depreciation?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sales-based method
Answer: d) Sales-based method
Which method of calculating depreciation results in a higher expense in the early years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) All of the above
Answer: b) Double-declining balance method
Which of the following is NOT a factor that affects the calculation of depreciation?
a) Cost of the asset
b) Useful life of the asset
c) Residual value of the asset
d) Market demand for the asset
Answer: d) Market demand for the asset
What is the formula for calculating straight-line depreciation?
a) (Cost of asset – Residual value) x Depreciation rate
b) Cost of asset x Depreciation rate
c) (Cost of asset + Residual value) / Useful life
d) None of the above
Answer: a) (Cost of asset – Residual value) x Depreciation rate
Depreciation MCQs
Which of the following is an example of a depreciable asset?
a) Cash
b) Land
c) Building
d) Accounts receivable
Answer: c) Building
What is the purpose of depreciation?
a) To determine the market value of an asset
b) To reduce the cost of an asset for tax purposes
c) To determine the book value of an asset
d) All of the above
Answer: c) To determine the book value of an asset
Which of the following is an example of a non-depreciable asset?
a) Equipment
b) Land
c) Building
d) Vehicles
Answer: b) Land
Which of the following is an example of an accelerated depreciation method?
a) Straight-line method
b) Units of production method
c) Sum-of-the-years’-digits method
d) All of the above
Answer: c) Sum-of-the-years’-digits method
Depreciation MCQs
Which of the following is a disadvantage of using the double-declining balance method?
a) It can result in negative book values for an asset
b) It is more complex to calculate than other methods
c) It does not accurately reflect the asset’s actual usage
d) All of the above
Answer: a) It can result in negative book values for an asset
Which of the following statements is true about residual value?
a) It is the estimated amount an asset will be worth at the end of its useful life
b) It is the cost of the asset minus any accumulated depreciation
c) It is the estimated amount an asset will sell for in the open market
d) None of the above
Answer: a) It is the estimated amount an asset will be worth at the end of its useful life.
Which of the following factors affect the calculation of depreciation?
a) Cost of asset
b) Residual value
c) Useful life
d) All of the above
Answer: d) All of the above
What is the formula for calculating the double-declining balance method of depreciation?
a) (Cost of asset – Residual value) x Depreciation rate
b) (Cost of asset / Useful life) x 2
c) (Cost of asset x Depreciation rate) x 2
d) None of the above
Answer: c) (Cost of asset x Depreciation rate) x 2
Depreciation MCQs
Which of the following is an example of a straight-line depreciation rate?
a) 200%
b) 50%
c) 10%
d) None of the above
Answer: c) 10%
Which of the following is an advantage of using the units of production method?
a) It accurately reflects the asset’s usage
b) It is easy to calculate
c) It results in a higher depreciation expense in the early years of an asset’s life
d) None of the above
Answer: a) It accurately reflects the asset’s usage
Which of the following is an example of a tangible asset?
a) Copyright
b) Trademark
c) Patent
d) Machinery
Answer: d) Machinery
Which of the following statements is true about tax depreciation?
a) It is calculated the same way as book depreciation
b) It is used to determine the market value of an asset
c) It is used to reduce the taxable income of a business
d) None of the above
Answer: c) It is used to reduce the taxable income of a business
Depreciation MCQs
Which method of depreciation assumes that an asset will depreciate more quickly in the early years of its life?
a) Straight-line method
b) Double-declining balance method
c) Sum-of-the-years’-digits method
d) Units of production method
Answer: b) Double-declining balance method
Which of the following is an example of an intangible asset?
a) Building
b) Vehicle
c) Goodwill
d) Inventory
Answer: c) Goodwill
Which of the following is the most commonly used method of depreciation?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: a) Straight-line method
Which of the following statements is true about salvage value?
a) It is the same as residual value
b) It is the cost of the asset minus any accumulated depreciation
c) It is the estimated amount an asset will sell for in the open market at the end of its useful life
d) None of the above
Answer: c) It is the estimated amount an asset will sell for in the open market at the end of its useful life.
Depreciation MCQs
Which of the following methods of depreciation is typically used for tax purposes in the United States?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: b) Double-declining balance method
Which of the following is an example of an asset that is typically depreciated using the units of production method?
a) Office furniture
b) Computers
c) Trucks
d) Buildings
Answer: c) Trucks
Which of the following is an example of an asset that is typically depreciated using the sum-of-the-years’-digits method?
a) Land
b) Patents
c) Machinery
d) Inventory
Answer: c) Machinery
Which of the following factors can cause a change in the estimated useful life of an asset?
a) Wear and tear
b) Technological advancements
c) Changes in market conditions
d) All of the above
Answer: d) All of the above
Depreciation MCQs
Which of the following methods of depreciation results in a higher depreciation expense in the early years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: b) Double-declining balance method
Which of the following statements is true about the half-year convention?
a) It assumes that an asset is placed in service at the midpoint of the first year of its useful life
b) It results in a higher depreciation expense in the first year of an asset’s life
c) It is used to simplify the calculation of depreciation
d) None of the above
Answer: a) It assumes that an asset is placed in service at the midpoint of the first year of its useful life
Which of the following statements is true about book value?
a) It is the estimated amount an asset will be worth at the end of its useful life
b) It is the cost of the asset minus any accumulated depreciation
c) It is the estimated amount an asset will sell for in the open market
d) None of the above
Answer: b) It is the cost of the asset minus any accumulated depreciation
Which of the following is an example of an asset that is not depreciated?
a) Building
b) Computer software
c) Land
d) Office equipment
Answer: c) Land
Depreciation MCQs
Which of the following factors affect the calculation of tax depreciation?
a) Cost of asset
b) Depreciation method
c) Tax laws
d) All of the above
Answer: d) All of the above
Which of the following statements is true about the modified accelerated cost recovery system (MACRS)?
a) It is a depreciation system used for tax purposes in the United States
b) It only allows for the use of the straight-line method of depreciation
c) It is the same as the double-declining balance method of depreciation
d) None of the above
Answer: a) It is a depreciation system used for tax purposes in the United States.
Which of the following is an example of an intangible asset that is amortized instead of depreciated?
a) Land improvements
b) Buildings
c) Patents
d) Office equipment
Answer: c) Patents
Which of the following factors affects the calculation of depreciation under the units of production method?
a) Cost of asset
b) Estimated useful life
c) Estimated total production or usage
d) All of the above
Answer: c) Estimated total production or usage
Depreciation MCQs
Which of the following methods of depreciation results in a lower depreciation expense in the early years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: a) Straight-line method
Which of the following methods of depreciation results in a higher depreciation expense in the later years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: d) Sum-of-the-years’-digits method
Which of the following statements is true about depreciation recapture?
a) It occurs when the sale price of an asset is greater than its book value
b) It is the difference between the sale price of an asset and its original cost
c) It results in a tax liability for the seller
d) All of the above
Answer: d) All of the above
Which of the following statements is true about the salvage value of an asset?
a) It is the estimated amount the asset will sell for at the end of its useful life
b) It is the same as the book value of an asset
c) It is the original cost of the asset
d) None of the above
Answer: a) It is the estimated amount the asset will sell for at the end of its useful life
Depreciation MCQs
Which of the following statements is true about accelerated depreciation methods?
a) They result in a higher depreciation expense in the early years of an asset’s life
b) They are typically used for tax purposes
c) They include the double-declining balance and sum-of-the-years’-digits methods
d) All of the above
Answer: d) All of the above
Which of the following statements is true about capitalizing an asset?
a) It means treating the asset as an expense on the income statement
b) It means recording the cost of the asset as an asset on the balance sheet
c) It is the same as expensing an asset
d) None of the above
Answer: b) It means recording the cost of the asset as an asset on the balance sheet
Which of the following methods of depreciation results in a depreciation expense that is based on the number of units produced?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: c) Units of production method
Which of the following statements is true about bonus depreciation?
a) It is a type of accelerated depreciation method
b) It allows businesses to deduct a larger portion of the cost of qualifying assets in the year they are placed in service
c) It is subject to certain limitations and restrictions
d) All of the above
Answer: d) All of the above.
Depreciation MCQs
Which of the following depreciation methods is based on the concept that an asset is used more heavily in the early years of its life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: b) Double-declining balance method
Which of the following is an example of a tax benefit that businesses can receive from depreciation?
a) Lowering the business’s taxable income
b) Reducing the amount of taxes the business owes
c) Increasing the business’s cash flow
d) All of the above
Answer: d) All of the above
Which of the following methods of depreciation results in a depreciation expense that is the same each year?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: a) Straight-line method
Which of the following factors does not affect the calculation of depreciation?
a) Cost of asset
b) Estimated useful life
c) Estimated salvage value
d) All of the above affect the calculation of depreciation
Answer: d) All of the above affect the calculation of depreciation
Depreciation MCQs
Which of the following statements is true about the modified accelerated cost recovery system (MACRS)?
a) It is the only depreciation system allowed by the IRS for tax purposes
b) It allows businesses to depreciate assets over a shorter period of time than other methods
c) It uses a set of depreciation tables to determine the appropriate depreciation rate for different types of assets
d) None of the above
Answer: c) It uses a set of depreciation tables to determine the appropriate depreciation rate for different types of assets
Which of the following is an example of an asset that is not subject to depreciation?
a) Buildings
b) Vehicles
c) Land
d) Equipment
Answer: c) Land
Which of the following statements is true about the useful life of an asset?
a) It is the estimated period of time over which the asset will provide benefits to the business
b) It is the same as the estimated salvage value of an asset
c) It is the same as the original cost of an asset
d) None of the above
Answer: a) It is the estimated period of time over which the asset will provide benefits to the business
Which of the following is an example of an asset that is typically depreciated over a shorter period of time than other assets?
a) Land
b) Buildings
c) Vehicles
d) Office equipment
Answer: c) Vehicles
Depreciation MCQs
Which of the following methods of depreciation results in a higher depreciation expense in the early years of an asset’s life?
a) Straight-line method
b) Double-declining balance method
c) Units of production method
d) Sum-of-the-years’-digits method
Answer: b) Double-declining balance method
Which of the following statements is true about the book value of an asset?
a) It is the original cost of the asset
b) It is the same as the salvage value of an asset
c) It is the cost of the asset minus its accumulated depreciation
d) None of the above
Answer: c) It is the cost of the asset minus its accumulated depreciation.
For More Accounting MCQs Click HERE