Multiple Choice Question
Select the right answer (only one possible answer unless otherwise stated).
1 The most appropriate method of depreciation of land is
(a) The straight-line method
(b) The declining balance method
(c) Either method
(d) None of these
2 Depreciation will directly generate
(a) An increase in cash
(b) An increase in liabilities
(c) A decrease in liabilities
(d) A decrease in assets
(e) A decrease in cash
3 At the end of the useful life of a tangible asset originally purchased for 100 CU and fully depreciated over five years, the gross value is
(a) 0
(b) 100
(c) 20
(d) None of these
4 Which of the following items would not be considered a tangible fixed asset?
1 Land
2 Trademark
3 Building
4 Oil well
5 Software
(a) 1, 3 and 4
(b) 2 and 4
(c) 2 and 5
(d) 2, 3, 4 and 5
(e) 3 and 5
5 Examples of tangible fixed assets include land, buildings and equipment
(a) True
(b) False
6 All tangible fixed assets are expensed over a period of years in some systematic and rational manner
(a) True
(b) False
7 Companies must use the same method of depreciation for all of their depreciable tangible fixed assets
(a) True
(b) False
8 When using the double declining balance method, in calculating the annual depreciation expense, the depreciation rate is applied to the
(a) Purchase price of the asset
(b) Fair value of the asset at beginning of the period
(c) Depreciable amount
(d) Book value at beginning of that year
(e) None of these
9 The share of a natural resource deposit’s cost of acquisition that is expensed each year is called
(a) Depreciation
(b) Amortization
(c) Depletion
(d) Exhaustion
(e) None of these
10 Which ratio(s) is (are) used to define the weight of tangible assets in financial statements?
(a) Net tangible assets/Total net assets
(b) Rate of return of tangible assets
(c) Tangible assets turnover
(d) Depreciation expense/Net sales
(e) Average life of tangible assets.