AFC Depreciation and Amortization

Question 1

Which depreciation method applies a constant rate to the declining book value of an asset each period?

Accepted Answer

Double-declining balance method

Answer

The double-declining balance method applies a fixed rate (typically twice the straight-line rate) to the asset's book value at the start of each period, resulting in higher depreciation in early years.

Question 2

An asset costs $50,000, has a salvage value of $5,000, and a useful life of 5 years. What is the annual straight-line depreciation?

Accepted Answer

$9,000

Answer

Straight-line depreciation = (Cost − Salvage Value) / Useful Life = ($50,000 − $5,000) / 5 = $9,000 per year.

Question 3

Which term describes the systematic allocation of an intangible asset's cost over its useful life?

Accepted Answer

Amortization

Answer

Amortization is the process of spreading the cost of an intangible asset (such as a patent or copyright) over its estimated useful life.

Question 4

What is the book value of a depreciable asset?

Accepted Answer

Original cost minus accumulated depreciation

Answer

Book value equals the asset's original cost less all accumulated depreciation recorded to date, representing its net carrying amount on the balance sheet.

Question 5

The units of production depreciation method bases the depreciation charge on:

Accepted Answer

Actual usage or output of the asset

Answer

The units of production method allocates depreciation based on actual activity—such as units manufactured or hours used—making it ideal for assets whose wear is directly tied to use.

AFC - Accounting Fundamentals Certification Practice Test

AFC - Accounting Fundamentals Certification Practice Test

AFC Depreciation and Amortization