depreciation

Question 1

define depreciation

Answer 1

systematic allocation of an assets cost or depreciable amount over the asset’s estimated useful life

Question 2

causes of depreciation

Answer 2

Physical deterioration

economic factor - out of date, inadequacy

Question 3

when does the depreciation of an asset begin

Answer 3

when the asset is available for use -when it is in the location and condition necessary for it to be capable of operating in the manner intended by management

Question 4

does depreciation ever cease

Answer 4

no - even when the object is idle or retired from active use - unless asset is full depreciated

Question 5

deprecation methods

Answer 5

straightline

reducing

Question 6

straight line depreciation formulae

Answer 6

cost-residual/estimated useful life

depreciable amount*rate of depreciation(%)

Question 7

define residual value

Answer 7

estimated amount that an entity would currently obtain from the disposal of an asset after deducting the estimated costs of disposal if the asset were already of the age and condition expected at the end of it’s useful life

Question 8

reducing balance depreciation

Answer 8

Cost – Accumulated depreciation (at end of last year) x Percentage