An asset costing 100 000 with a salvage of 10 000 after 9 years has a straight line annual depreciation of
Answer: A
Correct answer: 10 000
\[ \frac{100\,000 - 10\,000}{9} = \frac{90\,000}{9} = 10\,000\ \text{per year.} \] The salvage value must be deducted first; dividing the full cost by nine gives 11 111 and would write the asset down past its salvage value, which is one of the offered distractors.
Please log in or register to report this question.
For that asset the book value after 4 years under straight line is
Answer: B
Correct answer: 60 000
Book value is first cost less the depreciation charged so far: \[ 100\,000 - 4 \times 10\,000 = 60\,000. \] After all nine years the accumulated depreciation is 90 000 and the book value is 10 000, the salvage value - which is the check that the method has been applied correctly.
Please log in or register to report this question.
An asset costing 50 000 with a 5-year life has a double declining balance rate of
Answer: C
Correct answer: 40 per cent
The straight line rate is the reciprocal of the life and the double declining rate is twice it: \[ 2 \times \frac{1}{5} = 0.40 = 40\ \text{per cent.} \] The rate is a property of the life alone; neither the cost nor the salvage value enters it.
Please log in or register to report this question.
For that asset the first year's double declining balance charge is
Answer: D
Correct answer: 20 000
The rate is applied to the book value at the start of the year, which in the first year is the full first cost: \[ 0.40 \times 50\,000 = 20\,000. \] Salvage is not deducted from the base in declining balance, which is why the method must be watched to see that it does not write the asset below salvage later on.
Please log in or register to report this question.
For that same asset the book value after 2 years under double declining balance is
Answer: A
The first year takes 40 per cent of 50 000, that is 20 000, and the second 40 per cent of the remaining 30 000, that is 12 000, so 32 000 has gone and 18 000 remains. Straight line with zero salvage would have left 30 000.
Please log in or register to report this question.
An asset with a 5-year life has a sum of years digits denominator of
Answer: B
Correct answer: 15
\[ 1 + 2 + 3 + 4 + 5 = 15, \] or equivalently \( n(n+1)/2 = 5 \times 6/2 \). The denominator stays the same throughout the life while the numerator counts down from the full life to one, which is what makes the charge decline by equal steps.
Please log in or register to report this question.
For a 5-year asset costing 60 000 with zero salvage, the first year's sum of years digits charge is
Answer: C
Correct answer: 20 000
The first year takes the largest fraction, being the years of life remaining over the sum of the digits: \[ 60\,000 \times \frac{5}{15} = 60\,000 \times \frac{1}{3} = 20\,000. \] The base is the full 60 000 because the salvage value is zero; with a salvage value it would be deducted first.
Please log in or register to report this question.
For that same asset the final year's sum of years digits charge is
Answer: D
Correct answer: 4000
The last year takes the smallest fraction, one over the sum of the digits: \[ 60\,000 \times \frac{1}{15} = 4000. \] The five charges of 20 000, 16 000, 12 000, 8000 and 4000 sum to 60 000, which confirms that the whole depreciable base has been written off.
Please log in or register to report this question.
A machine costing 80 000 rated for 200 000 units, with zero salvage, is charged per unit at
Answer: A
Correct answer: 0.40
The rate per unit is the depreciable base divided by the total output expected: \[ \frac{80\,000}{200\,000} = 0.40\ \text{per unit.} \] The rate is fixed at the outset and applied to whatever is produced, so the charge follows use rather than time.
Please log in or register to report this question.
For that machine, 30 000 units in a year gives a depreciation charge of
Answer: B
Correct answer: 12 000
\[ 30\,000 \times 0.40 = 12\,000. \] Had the machine stood idle the charge would have been nothing, which is the essential difference from straight line and the reason the method suits equipment whose workload varies from year to year.
Please log in or register to report this question.
