Dec 27, 2015 depreciation is the process of allocating the cost of property, plant and equipment over the life of the asset. You will receive your score and answers at the end. Accumulated depreciation is the total depreciation of the fixed asset accumulated up to a specified time. A new account called disposal of fixed assets account is opened and the cost of the fixed asset being disposed of is transferred to this account by debiting the disposal of fixed assets. Specifically, it is an accounting concept that sets an annual deduction considering the factor of time. Nov 15, 2018 explanation if a fixed asset is sold, or otherwise disposed of, the following accounting entries are made to record the relevant transactions. A full years depreciation should be provided in the year of purchase, but no depreciation should be provided in the year of disposal. Topic overview, teaching plan and answers to student worksheet. Complete the following ledger accounts, properly balancedclosed off on 30 june 2014. Fill in all the gaps in part b, then press check at the bottom to check your answers. The trial balance at year end 31st december, 1993 is as follows. Depreciation and disposal of fixed assets play accounting.
Accounting for property, plant and equipment, asset retirement. Depreciation was recorded on the machine for 2009 and 2010 under the straightline method using an estimated useful life of five years and no expected salvage value. Depreciation accounting general questions and answers. Depreciation is a systematic and rational means of allocating the net cost of an asset over its useful life.
The following practice questions show the straightline depreciation method in. Depreciation is charged in each accounting period by reference to the extent of the depreciable amount. Just click the start quiz button and start depreciation mcqs quiz. David parnell decided that depreciation should be calculated on motor vehicles owned at 30 september each year at the rate of 25 % per annum, using the straight line method. As a member, youll also get unlimited access to over 79,000 lessons in math. Depreciation is the process of allocating the cost of property, plant and equipment over the life of the asset. Test your accounting skills with these exercises on elements of accounting under the fundamental accounting concepts tutorials. Calculate complete depreciation schedules giving the depreciation charge, dn, and endofyear book value, bn, for straightline sl, sum. Get aipb mastering depreciation final exam answer key pdf file for free from our online library. Depreciation depreciation a decrease in value of an asset each year a noncash cost no money changing hands that affects income taxes an annual deduction against beforetax income a business expense the government allows to offset the loss in value of business assets. Depreciation 2 straight line depreciation percent book value at the beginning of the accounting period. At accounting basics for students were working hard to bring you quality accounting information, including questions and exercises you can use for practice. Merri traders purchased new equipment on 31 october 2007 for r16 800 cash from super suppliers.
Simple and compound depreciation finance, growth and decay. The amount of depreciation is credited to the depreciation fund account in the depreciation fund method. Test your knowledge of double entry bookkeeping with our straight line method of depreciation quiz. How do i calculate depreciation using the sum of the years digits. In this article we will discuss about the top eight accounting problems on depreciation of an asset with their relevant solutions. Use this quizworksheet combination to test your knowledge of methods of depreciation. These mcqs can help you to prepare for your exams, interviews and different tests. Prepare the following accounts in the general ledger of tassel tailors. The depreciation entry reduces net income, but it does not reduce the companys cash.
Dealing with fixed assets and depreciation dealing with depreciation. An accountant uses depreciation is to allocate the cost of a fixed asset over the years of its useful life. Depreciation is a term used to describe the reduction in the value of as asset over a number of years. Sep 25, 2019 test your knowledge of double entry bookkeeping with our straight line method of depreciation quiz. Worksheet problem 1 juniper corporation provided the following summary balance sheet information. Vehicles, equipment, machinery and other similar assets, all lose value over time as a result of usage and age. Hence, some refer to depreciation as a noncash expense.
In case of insurance policy method, the depreciation is credited to the asset account. The straightline depreciation method is the most popular type because it allocates the same amount of depreciation to each year the asset is in use. Book value cost of the asset accumulated depreciation. View notes chapter 11 additional depreciation problems with solutions from acg 31 at university of central florida.
Full accounting exercises accounting basics for students. Best of all, they are entirely free to find, use and download, so there is no cost or stress at all. Take a quick multiple choice questions mcqs test about depreciation. These exercises were submitted by website visitors and solutions have been fully worked out for your benefit. Explanation if a fixed asset is sold, or otherwise disposed of, the following accounting entries are made to record the relevant transactions.
Depreciation means the decrease in the value of physical properties or assets with the passage of time and use. Exam questions asset disposal 12 november 2014 lesson description in this lesson we revise. The attachment provides information on depreciation and related issues in a question and answer format. Depreciation has a significant ef fect in deter mining and presenting the financial position and results of operations of an enterprise. Accounting is the backbone of any organization and offers a wide number of attractive careers. If you need a refresher course on the use of the straight line method of depreciation, take a look at our. Depreciation method should be rational and systematic. To pass the quiz, you will need to be familiar with the methods and be able to apply them. On 1st july, 2008 a company purchased a machine for rs 3,90,000 and spent rs 10,000 on its installation. Manufacturing account with answers a modified trading and profit and loss account a company imported transistor radios from britain, however, the radios must be modified to meet hong kong specifications with the help of some equipment.
The calculation of depreciation using the decliningbalance method. Depreciation and amortization the acquisition of intangible assets. Chapter 17, depreciation, amortization, and depletion 2 if property has a useful life shorter than the taxable year, its full cost could be completely deducted before the next taxable year, obviating the problem of unaccounted losses. Methods of depreciation depreciation is a allowable expenses in general accounting purposes and income tax accounting purposes. For each item, indicate whether it is an asset, a liability, or.
The asset appears always at original cost in case depreciation is credited to provision for depreciation account. Provision for depreciation and disposal of assets title 6. For accounting and tax purposes, the depreciation expense is calculated and used to writeoff the cost of purchasing highvalue assets. Depreciation schedule template for straightline and. Chapter 11 additional depreciation problems with solutions.
The entry for depreciation is a debit to depreciation expense and a credit to accumulated depreciation. Solution solution 1 a general journal date accounts debit credit dec. This chapter deals with the different methods of depreciation with their merits and. Depreciation means decline in the value of a fixed assets due to use, passage. In this unit you will learn about some of the more common careers in the field of accountancy.
It is the noncash method of representing the reduction in value of a tangible asset. Accounting test paper questions with answers on accounting. This company markets a broad range of laundry, cleaning, paper, beauty care, health care, food, and beverage products in more than 140 countries around the world. Depreciation, impairments and depletion multiple choice. Read the instructions in part a and then complete part b. Exam questions asset disposal 12 november 2014 lesson. For the exercises below, write your answers on a piece of paper. Compute the depreciation expense on the computer for 2010. Calculate complete depreciation schedules giving the depreciation charge, dn, and endof. Did you succeed in finding different depreciation rates. Pdf accounting test paper questions with answers on. Read moredepreciation and disposal of fixed assets. Chapter 9 questions multiple choice harper college.
Accounting for depreciation of fixed assets page 1 if you need more questions and answers ebooks on subjects like bookkeeping, financial accounting, costingmanagerial accounting and financial. Test your understanding with practice problems and stepbystep solutions. Depreciation methods accounting questions and answers. On april 1, 2012, company x purchased an equipment for rs. Depreciating assets primary production only nonprimary production only balancing adjustment events decline in value deduction for decline in value description of asset date of acquisition cost opening adjustable value date termination value balancing adjustment amounts effective life percentage rate prime cost diminishing value.
Buildings are depreciated using the straightline depreciation method. Accounting test paper questions with answers on accounting for depreciation of fixed assets. When youre done, check the answers page here to see if you got them. Straight line depreciation is one method of calculating the depreciation expense on long term assets such as property, plant, and equipment. Depreciation exercise book value depreciation scribd. The income statement and comparative balance sheet of edison corporation is given below. Depreciation is a measure of the wearing out, consumption or other reduction in the useful economic life of an asset whether. Read and download pdf ebook aipb mastering depreciation final exam answer key at online ebook library. Why is depreciation on the income statement different from the depreciation on the balance sheet. Asset disposal depreciation calculations tangible asset note exam questions question 1 tangible assets 32 min. As soon as a new car leaves the dealership, its value decreases and it is considered secondhand.
Straightline depreciation method allocates same amount of depreciation expense in each period. This method assumes that the depreciation charge in the early years of an assets life should be higher than in later years. Loss on sale of fixed asset is a nonoperating expense true false 3. Reducing balance method of providing for depreciation is where the amount of depreciation is reduced from year to year true false 4. A depreciation schedule is a table that shows the depreciation amount over the span of the assets life. Calculate annual depreciation and book value at year 4. The subject matter of depreciation, or its base, are depreciable assets which. What is the accounting journal entry for depreciation. Straightline depreciation practice questions dummies. But it differ categorically from other conventional expenses because depreciation charge does not occur any outflow of business fund. The accumulated depreciation on this equipment at 1 march 7 was r 12 000.
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