Free Depreciation and Non-Current Assets MCQs with Answers
33 Depreciation and Non-Current Assets MCQs from Accounting, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
Last updated
33 questions · page 2 of 2
- A. Equal depreciation charges throughout the asset's life
- B. Depreciation based only on units produced
- C. Higher depreciation charges in the earlier years
- D. Depreciation beginning after the asset is fully paid
Explanation: The reducing-balance method applies a fixed percentage to the asset's declining carrying amount.
Correct answer: Higher depreciation charges in the earlier years- A. Land is always recorded at its residual value
- B. Land must always be depreciated faster than buildings
- C. Buildings cannot be recognized as non-current assets
- D. The land and building usually have different useful lives
Explanation: Land usually has an unlimited useful life, while a building has a finite useful life.
Correct answer: The land and building usually have different useful lives- A. At cost less accumulated depreciation and impairment losses
- B. At fair value less future tax charges
- C. At residual value plus accumulated depreciation
- D. At replacement cost less disposal expenses
Explanation: The cost model carries property, plant and equipment at its cost less accumulated depreciation and accumulated impairment losses.
Correct answer: At cost less accumulated depreciation and impairment losses- A. Depreciation stops until production resumes
- B. Depreciation continues while the machine remains available for use
- C. Depreciation is transferred permanently to repairs expense
- D. Depreciation is recognized only when the machine is sold
Explanation: Temporary idleness does not by itself remove an asset from use for depreciation purposes.
Correct answer: Depreciation continues while the machine remains available for use- A. The number of employees in the finance department
- B. The amount of cash held by the business
- C. Expected usage and the machine's expected physical wear
- D. The market price of unrelated inventory
Explanation: Useful life depends on expected usage, physical wear, technological obsolescence and legal or contractual limits.
Correct answer: Expected usage and the machine's expected physical wear- A. It is immediately charged as an ordinary repair
- B. It is recognized as a liability without an asset
- C. It is recorded as accumulated depreciation
- D. It is recognized as part of the machine's carrying amount
Explanation: A major inspection cost that meets the recognition criteria is capitalized as part of property, plant and equipment.
Correct answer: It is recognized as part of the machine's carrying amount- A. The lower of cost and fair value
- B. The higher of fair value less costs of disposal and value in use
- C. The higher of historical cost and residual value
- D. The lower of carrying amount and value in use
Explanation: Recoverable amount is the higher of fair value less costs of disposal and value in use.
Correct answer: The higher of fair value less costs of disposal and value in use- A. Its original cost without any depreciation
- B. Its current market value in every case
- C. The carrying amount that would have existed without the impairment
- D. Its original residual value plus the impairment loss
Explanation: A reversal cannot increase the asset above the carrying amount that would have resulted if no impairment had been recognized.
Correct answer: The carrying amount that would have existed without the impairment- A. Charge them immediately as administrative expense
- B. Record them as revenue from the production line
- C. Deduct them from the asset's residual value
- D. Include them in the initial cost of the production line
Explanation: Directly attributable costs necessary to bring an asset to the location and condition required for operation form part of its initial…
Correct answer: Include them in the initial cost of the production line- A. When benefits are probable and cost is measurable reliably
- B. When it is purchased with cash only
- C. When its market value rises above original cost
- D. When management expects it to last for one year
Explanation: Recognition requires probable future economic benefits and a cost that can be measured reliably.
Correct answer: When benefits are probable and cost is measurable reliably31. Which principle should primarily determine the depreciation method selected for a non-current asset?
- A. The amount of cash paid for the asset
- B. The pattern in which its economic benefits are consumed
- C. The market price of the asset at year end
- D. The date on which the asset was purchased
Explanation: The depreciation method should reflect how the asset's economic benefits are consumed.
Correct answer: The pattern in which its economic benefits are consumed- A. When interest is paid after the asset is sold
- B. When funds are borrowed for any routine office expense
- C. When funds finance an asset requiring substantial preparation
- D. When the asset is acquired without any preparation
Explanation: Borrowing costs may be capitalized when they are directly attributable to a qualifying asset that takes a substantial period to get ready…
Correct answer: When funds finance an asset requiring substantial preparation- A. In inventory as part of the production cost
- B. In share capital as a reduction of issued capital
- C. In revenue as an increase in operating income
- D. In profit or loss for the reporting period
Explanation: A downward revaluation is normally recognized in profit or loss when no earlier surplus exists for the same asset.
Correct answer: In profit or loss for the reporting period