17 Questions
What is the annual depreciation expense for the plant asset using the straight-line method?
$24,000
What is the book value of the plant asset at the end of Year 1 using the straight-line method?
$120,000
What is the annual depreciation rate for the plant asset using the double-declining balance method?
40%
What is the book value of the plant asset at the end of Year 1 using the double-declining balance method?
$91,000
Which method results in higher depreciation expense in the earlier years of an asset's life?
Double-declining balance
Which of the following is a key assumption of the straight-line depreciation method?
The asset's value decreases at a constant rate over its useful life.
Which depreciation method would be most appropriate for a machine used in a manufacturing process that produces a fixed number of units per year?
Units of production method
What is the primary reason a company might choose to use the units of production method for calculating depreciation?
To align the depreciation expense with the asset's actual usage or output.
Which of the following is a key advantage of the double-declining balance method compared to the straight-line depreciation method?
It better reflects the actual decline in the asset's value over time.
How does the double-declining balance method differ from the straight-line depreciation method in terms of the depreciation expense recognized in the early years of an asset's useful life?
The double-declining balance method results in a higher depreciation expense in the early years.
Which of the following is a key factor that influences the choice of depreciation method for a company?
The company's tax planning objectives.
What is the main difference between the straight-line depreciation method and the double declining balance method?
The straight-line method allocates depreciation equally over the asset's life, while the double declining balance method allocates more depreciation in the early years.
What is the formula used to calculate depreciation under the units of production method?
Annual Depreciation = (Total Cost - Salvage Value) / Total Units Produced
What is the key advantage of using the double declining balance method over the straight-line method?
The double declining balance method better reflects the actual decline in an asset's value over time.
Which depreciation method is most commonly used for equipment whose value depends on the number of units it can produce over its life?
Units of production method
What is the annual depreciation expense for an asset that costs $10,000, has a salvage value of $1,000, and is expected to produce 50,000 units over its useful life?
$200 per unit produced
Which depreciation method would result in the highest depreciation expense in the first year of an asset's life?
Double declining balance method
Test your knowledge on making adjusting journal entries for plant asset depreciation using the Straight-line method and Double-declining-balance method. Calculate the necessary adjustments at the end of Year 1 for a plant asset purchased by X company. Compare the depreciation amounts under both methods.
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