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Depreciation Account: Diminishing or Reducing Balance Method: Meaning, Formula, And Preparation - SS1 Accounting Past Questions and Answers - page 1

1

What is the formula for calculating depreciation using the reducing balance method?

A

Cost of the asset x Depreciation rate

B

Book value of the asset x Depreciation rate

C

Cost of the asset / Depreciation rate

D

Book value of the asset / Depreciation rate

correct option: b
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2

What is the assumption made when using the reducing balance method of depreciation?

A

The asset depreciates at an equal rate over its useful life

B

The asset depreciates at a faster rate in the early years of its useful life and at a slower rate in the later years

 

C

The asset depreciates at a slower rate in the early years of its useful life and at a faster rate in the later years

D

The asset has no salvage value at the end of its useful life

correct option: b
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3

How is the book value of the asset calculated using the reducing balance method?

A

Cost of the asset - Accumulated depreciation

B

Cost of the asset x Depreciation rate

C

Accumulated depreciation / Useful life

D

Depreciation expense x Useful life

correct option: a
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4

What is the purpose of preparing a depreciation schedule using the reducing balance method?

A

To calculate the cost of the asset

B

To determine the useful life of the asset

C

To allocate the cost of the asset over its useful life

D

To calculate the salvage value of the asset

correct option: c
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5

What is the difference between the straight-line method and the reducing balance method of depreciation?

The straight-line method assumes that the asset depreciates at an equal rate over its useful life, while the reducing balance method assumes that the asset depreciates at a faster rate in the early years of its useful life and at a slower rate in the later years.

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6

How is the depreciation rate determined when using the reducing balance method of depreciation?

 

The depreciation rate is determined by dividing 100% by the useful life of the asset.

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