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Depreciation Provisions and Reserves Test - 46

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Depreciation Provisions and Reserves Test - 46
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  • Question 1
    1 / -0
    Process of becoming out of date or obsolete is termed as_____________.
    Solution
    The word "obsolete" refers to assets of different kinds, and the term, in general, has several meanings. "Obsolete" as an adjective can refer to something that is: No longer used, like a buggy whip. Out of date or old-fashioned, like a pair of bell-bottomed trousers from the 1970s.
  • Question 2
    1 / -0
    Depreciation does not depend on fluctuations as:
    Solution
    Depreciation is calculated on the bases of cost of asset, scrap value and useful life, therefore, change in the market value of the asset does not have any impact.
  • Question 3
    1 / -0
    The Amount changed to deprecation goes on declining in ______________.
    Solution
    Written-down value can be calculated by a method of depreciation that is sometimes called the diminishing balance method. This accounting technique reduces the value of an asset by a set percentage each year. When selling the asset, the book value is used to help determine the minimum value for which it will be sold.
  • Question 4
    1 / -0
    The allocation Of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as __________.
    Solution
    The allocation of the cost of a tangible plant asset to expense in the periods, in which services are received from the asset, is termed as Depreciation. Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from the use of the asset.
  • Question 5
    1 / -0
    In which depreciation method Depreciation remains constant?
    Solution
    Reducing balance depreciation – also known as declining balance depreciation or diminishing balance depreciation – is a method of calculating depreciation whereby an asset is expenses at a set percentage.
  • Question 6
    1 / -0
    Which of the following is the main cause of depreciation?
    Solution
    When asset losses its efficiency, its value goes down and depreciation arises. This is true in the case of tangible assets like plant and machinery, building, furniture, tools and equipment used in the factory. Market value and accident of an asset are other causes of depreciation that decrease the value of assets.
  • Question 7
    1 / -0
    The estimated value of an asset after the expiry of its useful life is called as _______________.
    Solution
    An asset can reach full depreciation when its useful life expires or if an impairment charge is incurred against the original cost, though this is less common.  The balance sheet will still reflect the original cost of the asset and the equivalent amount of accumulated depreciation.
  • Question 8
    1 / -0
    Depreciation is based on _________________.
    Solution
    Economic Life and Depreciation Depreciation refers to the rate at which an asset deteriorates over time. The depreciation rate is used to estimate the effects of aging, daily use, and wear and tear on the asset. When related to technology, depreciation can also include the risk of obsolescence.

  • Question 9
    1 / -0
    Which of the following asset is NOT depreciated?
    Solution
    Land is not depreciated because land is assumed to have an unlimited useful life. Other long-lived assets such as land improvements, buildings, furnishings, equipment, etc. have limited useful lives. Therefore, the costs of those assets must be allocated to those limited accounting periods.
  • Question 10
    1 / -0
    Depreciation value of an asset is equal to:
    Solution
    The depreciation value of an asset is equal to the cost minus the scrap value.
    Hence, option (C) is the correct answer.
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