Practice Depreciation Estimates Comparison (3.1) - Sum of the Years Digit Method

Practice: Depreciation Estimates Comparison

Lesson 3.1Sum of the Years Digit Method

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8 questions

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Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is depreciation?
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Think about how assets lose value.
Question 2.
What does salvage value mean?
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Consider what you would get after disposing of an asset.
3Question 3.
What is the primary benefit of using the Double Declining Balance method?
- Lower overall depreciation
- Higher early depreciation
- Consistent annual depreciation
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Consider which method gives more upfront financial benefit.
4Question 4.
True or False: The Sum of the Years' Digits method ignores the salvage value in calculations.
- True
- False
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Think about how calculations are conventionally made.
Question 5.
A company purchases machinery worth ₹1,000,000 with a salvage value of ₹100,000 and a useful life of 10 years. Calculate the depreciation for the third year using both SYD and DDB methods.
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Calculate book values carefully for accurate DDB values.
Question 6.
Given a machine with an initial cost of ₹1,500,000 and a salvage value of ₹150,000, switching from DDB method to straight line after year 4 because it depreciated too fast, explain the impact on financial statements.
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Consider how switching methods affects overall asset valuation.

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