Practice Minimum Cost Method Overview (5.2) - Depreciation Calculation

Practice: Minimum Cost Method Overview

Lesson 5.2Depreciation Calculation

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8 questions

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6 sample questions

Question 1.
What is depreciation?
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Think about how an asset's value decreases over time.
Question 2.
How do you calculate the book value after one year?
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Use the initial value and subtract the determined depreciation.
3Question 3.
What is the primary purpose of the minimum cost method?
- To calculate depreciation only
- To determine replacement timing based on cost
- To evaluate total revenue
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Think about the method's goal.
4Question 4.
True or False: Dr. James Douglas's guidelines suggest that machinery should be replaced when the estimated annual cost of the current machine is lower than the proposed machine's costs.
- True
- False
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Consider when replacement should happen.
Question 5.
A machine has an initial cost of 5 million rupees, with 30% depreciation yearly. Calculate the depreciation and book value after two years, then find the cumulative cost if operating costs are 1.5 million each year.
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Follow the depreciation and cost formulas step by step.
Question 6.
If a proposed replacement's average annual cumulative cost is 2 million rupees, and your current machine's estimated annual cost is 2.5 million, describe the decision to replace.
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Compare current and proposed costs.

4 more questions in this section. Enroll free to practise them all.