Meaning of Depreciation - SS1 Accounting Past Questions and Answers - page 1
1
What is depreciation?
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A
The process of allocating the cost of a tangible asset over its useful life
B
The process of selling a tangible asset at the end of its useful life
C
The process of increasing the value of a tangible asset over time
D
The process of recording the cost of intangible assets on the balance sheet
2
What types of assets are usually subject to depreciation?
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A
Fixed assets such as buildings, vehicles, equipment, and machinery
B
Current assets such as cash, inventory, and accounts receivable
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C
Intangible assets such as patents, trademarks, and copyrights
D
All of the above
3
What is the purpose of calculating depreciation?
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A
To account for the eventual loss in value of a fixed asset
B
To increase the value of a fixed asset on the balance sheet
C
To reduce the company's taxable income
D
All of the above
4
How is the amount of depreciation taken each year calculated?
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A
Using a specific formula based on the cost of the asset, its estimated useful life, and its estimated salvage value at the end of its useful life
B
Based on the current market value of the asset
C
Based on the company's current income
D
Using a formula based on the company's total assets
5
What is the difference between tangible and intangible assets?
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6
How does depreciation affect a company's financial statements?
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