Practice Depreciation Accounting Methods (5) - Construction Methods and Equipment Management

Practice: Depreciation Accounting Methods

Lesson 5Construction Methods and Equipment Management

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10 questions

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6 sample questions

Question 1.
What are the two main components of equipment costs?
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Think about costs that are incurred whether the equipment is used or not.
Question 2.
Define depreciation in your own words.
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Consider how equipment wears down or loses value.
3Question 3.
What is the primary distinction between ownership and operating costs?
- Ownership costs occur regardless of usage
- Operating costs are fixed
- Ownership costs vary per project
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Think about costs that are always present.
4Question 4.
True or False: Depreciation is a cash expense.
- True
- False
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Consider whether this represents an actual payment.
Question 5.
A piece of equipment costs $200,000, has a salvage value of $20,000, and a useful life of 8 years. Calculate its annual depreciation using both the straight line and double declining balance methods.
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Calculate straight-line normally; remember double declining balance requires calculating based on book value.
Question 6.
If a machine has a useful life of 10 years and an initial cost of $100,000 with a salvage value of $10,000, outline the first year's depreciation using the sum of years' digits method.
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Sum of the digits from 1 to 10 gives you the denominator.

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