Fixed Assets MCQs
Which of the following is considered a fixed asset?
a) Inventory
b) Cash
c) Accounts receivable
d) Building
Answer: d) Building
Fixed assets are typically held by a company for:
a) Less than a year
b) Between one to three years
c) More than three years
d) Indefinitely
Answer: c) More than three years
Which of the following is NOT a type of fixed asset?
a) Land
b) Equipment
c) Patents
d) Accounts payable
Answer: d) Accounts payable
Which of the following depreciation methods allocates the cost of a fixed asset evenly over its useful life?
a) Straight-line depreciation
b) Double-declining balance depreciation
c) Units-of-production depreciation
d) Sum-of-years’ digits depreciation
Answer: a) Straight-line depreciation
A fixed asset’s book value is calculated as:
a) Original cost minus accumulated depreciation
b) Market value minus accumulated depreciation
c) Original cost plus accumulated depreciation
d) Market value plus accumulated depreciation
Answer: a) Original cost minus accumulated depreciation
Fixed Assets MCQs
Which financial statement reports the book value of fixed assets?
a) Balance sheet
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
Answer: a) Balance sheet
Which of the following is an example of an intangible fixed asset?
a) Land
b) Machinery
c) Copyright
d) Furniture
Answer: c) Copyright
When a fixed asset is sold, any gain or loss is calculated as the difference between the:
a) Original cost and the selling price
b) Book value and the selling price
c) Accumulated depreciation and the selling price
d) Market value and the selling price
Answer: b) Book value and the selling price
The process of allocating the cost of a fixed asset over its useful life is known as:
a) Accumulation
b) Amortization
c) Depreciation
d) Appreciation
Answer: c) Depreciation
Which of the following is a characteristic of fixed assets?
a) Easily convertible to cash
b) Held for resale
c) Physical existence
d) Current utilization
Answer: c) Physical existence
Fixed Assets MCQs
Which of the following is an example of a tangible fixed asset?
a) Trademark
b) Goodwill
c) Computer software
d) Machinery
Answer: d) Machinery
The process of recording the gradual reduction in the value of a fixed asset is known as:
a) Amortization
b) Impairment
c) Appreciation
d) Depreciation
Answer: d) Depreciation
Which depreciation method assumes that the fixed asset’s usefulness declines more in the early years of its life?
a) Straight-line depreciation
b) Sum-of-years’ digits depreciation
c) Double-declining balance depreciation
d) Units-of-production depreciation
Answer: c) Double-declining balance depreciation
Which of the following is an example of a natural resource as a fixed asset?
a) Patent
b) Trademark
c) Oil well
d) Building
Answer: c) Oil well
The salvage value of a fixed asset represents:
a) The original cost of the asset
b) The estimated residual value of the asset at the end of its useful life
c) The market value of the asset
d) The accumulated depreciation of the asset
Answer: b) The estimated residual value of the asset at the end of its useful life
Fixed Assets MCQs
Which of the following fixed assets is classified as “held for sale”?
a) Land held for investment purposes
b) Building used as a company’s headquarters
c) Machinery used in production
d) Warehouse intended to be sold in the near future
Answer: d) Warehouse intended to be sold in the near future
How does the disposal of a fixed asset affect the financial statements?
a) It increases net income on the income statement.
b) It decreases total assets on the balance sheet.
c) It decreases retained earnings on the statement of retained earnings.
d) It has no impact on the financial statements.
Answer: b) It decreases total assets on the balance sheet.
Which of the following is an example of an improvement made to a fixed asset?
a) Routine maintenance
b) Repairing a broken part
c) Adding an extension to a building
d) Replacing an outdated computer
Answer: c) Adding an extension to a building
What is the primary objective of depreciation for fixed assets?
a) To accurately represent the market value of the asset
b) To reduce the tax liability of the company
c) To allocate the cost of the asset over its useful life
d) To increase the company’s net income
Answer: c) To allocate the cost of the asset over its useful life
Which of the following is an example of an intangible fixed asset?
a) Land
b) Building
c) Trademark
d) Delivery truck
Answer: c) Trademark
Fixed Assets MCQs
Which of the following is an example of a fixed asset with an indefinite useful life?
a) Office furniture
b) Computer equipment
c) Land
d) Leasehold improvements
Answer: c) Land
Which depreciation method calculates depreciation based on the fixed asset’s usage or production output?
a) Straight-line depreciation
b) Units-of-production depreciation
c) Double-declining balance depreciation
d) Sum-of-years’ digits depreciation
Answer: b) Units-of-production depreciation
Which of the following fixed assets is typically subject to depletion instead of depreciation?
a) Land
b) Buildings
c) Vehicles
d) Natural resources
Answer: d) Natural resources
Which financial statement would you find information about the accumulated depreciation of fixed assets?
a) Income statement
b) Statement of cash flows
c) Statement of retained earnings
d) Balance sheet
Answer: d) Balance sheet
The process of allocating the cost of an intangible fixed asset over its useful life is known as:
a) Accumulation
b) Depreciation
c) Amortization
d) Impairment
Answer: c) Amortization
Fixed Assets MCQs
Which of the following factors is NOT considered when determining the useful life of a fixed asset?
a) Physical wear and tear
b) Technological obsolescence
c) Market demand
d) Historical cost
Answer: d) Historical cost
Which of the following is an example of an intangible fixed asset?
a) Machinery
b) Buildings
c) Copyright
d) Land
Answer: c) Copyright
Which of the following is a contra account associated with fixed assets?
a) Accumulated depreciation
b) Accounts payable
c) Prepaid expenses
d) Retained earnings
Answer: a) Accumulated depreciation
How does the purchase of a fixed asset affect the accounting equation?
a) It increases assets and increases liabilities.
b) It increases assets and decreases equity.
c) It decreases assets and increases liabilities.
d) It decreases assets and decreases equity.
Answer: b) It increases assets and decreases equity.
Which of the following fixed assets is most likely to be subject to a lease agreement?
a) Land
b) Buildings
c) Vehicles
d) Patents
Answer: c) Vehicles