MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO SALVAGE VALUE AND SCRAP VALUE
What is salvage value?
A) The value of an asset at the end of its useful life
B) The initial cost of an asset
C) The value of an asset when it is bought
D) The value of an asset when it is sold
Answer: A) The value of an asset at the end of its useful life
What is the primary difference between salvage value and scrap value?
A) Salvage value applies to assets that can be reused, while scrap value refers to assets that cannot be reused.
B) Salvage value is always higher than scrap value.
C) Salvage value applies to scrap metal only, while scrap value applies to various materials.
D) Salvage value is determined at the beginning of an asset’s life, while scrap value is determined at the end.
Answer: A) Salvage value applies to assets that can be reused, while scrap value refers to assets that cannot be reused.
Which of the following factors is considered when determining salvage value?
A) Original purchase price
B) Remaining useful life
C) Current market value
D) All of the above
Answer: D) All of the above
A company purchases machinery for RS.50,000 with a salvage value of RS.5,000. If the machinery is estimated to have a useful life of 10 years, what will be the annual depreciation expense using straight-line method?
A) RS.5,000
B) RS.4,500
C) RS.4,000
D) RS.45,000
Answer: B) RS.4,500
Which method of depreciation considers salvage value when calculating depreciation expense?
A) Straight-line method
B) Double-declining balance method
C) Units of production method
D) Sum-of-the-years’-digits method
Answer: A) Straight-line method
A company purchases equipment for RS.100,000 with a salvage value of RS.10,000 and an estimated useful life of 5 years. Using the straight-line method, what is the annual depreciation expense?
A) RS.18,000
B) RS.20,000
C) RS.18,200
D) RS.19,000
Answer: A) RS.18,000
Which of the following statements about salvage value is true?
A) Salvage value is always zero.
B) Salvage value is the same as the scrap value.
C) Salvage value is an estimate of an asset’s value at the end of its useful life.
D) Salvage value is used to determine the initial cost of an asset.
Answer: C) Salvage value is an estimate of an asset’s value at the end of its useful life.
How does salvage value impact depreciation expense?
A) Higher salvage value results in higher depreciation expense.
B) Salvage value does not affect depreciation expense.
C) Lower salvage value results in higher depreciation expense.
D) Salvage value impacts depreciation expense only in the first year.
Answer: C) Lower salvage value results in higher depreciation expense.
A machine was purchased for RS.50,000 with a salvage value of RS.5,000. After 5 years, it is sold for RS.12,000. What is the total depreciation expense using the straight-line method?
A) RS.38,000
B) RS.45,000
C) RS.40,000
D) RS.35,000
Answer: C) RS.40,000
What happens to an asset’s book value when its salvage value is higher than its estimated residual value?
A) Book value remains unchanged.
B) Book value increases.
C) Book value decreases.
D) Book value becomes zero.
Answer: B) Book value increases.
Which of the following best defines salvage value?
A) The amount an asset can be sold for at any point during its useful life.
B) The value of an asset at the end of its useful life.
C) The cost incurred to repair an asset.
D) The market value of an asset when it was purchased.
Answer: B) The value of an asset at the end of its useful life.
Salvage value is also known as:
A) Residual value
B) Purchase value
C) Market value
D) Retail value
Answer: A) Residual value
When estimating salvage value, which factor(s) should be considered?
A) Historical cost
B) Current market conditions
C) Useful life
D) B and C only
Answer: D) B and C only
A machine has an original cost of RS.50,000, an estimated useful life of 8 years, and a salvage value of RS.5,000. Using the straight-line method, what is the annual depreciation expense?
A) RS.6,875
B) RS.6,250
C) RS.5,625
D) RS.6,000
Answer: C) RS.5,625
Which depreciation method does not consider salvage value when calculating depreciation?
A) Double-declining balance method
B) Units of production method
C) Straight-line method
D) Sum-of-the-years’-digits method
Answer: A) Double-declining balance method
A company purchases a vehicle for RS.40,000 with a salvage value of RS.6,000 and an estimated useful life of 5 years. Using the double-declining balance method, what is the book value at the end of Year 2?
A) RS.17,600
B) RS.21,600
C) RS.19,200
D) RS.24,000
Answer: A) RS.17,600
Salvage value impacts depreciation expense by:
A) Reducing the carrying amount of an asset
B) Increasing the useful life of an asset
C) Decreasing the initial cost of an asset
D) Not affecting depreciation calculations
Answer: A) Reducing the carrying amount of an asset
Which method considers salvage value when calculating the annual depreciation expense?
A) Double-declining balance method
B) Units of production method
C) Sum-of-the-years’-digits method
D) All of the above
Answer: D) All of the above
Salvage value is an important factor in determining:
A) Book value
B) Accumulated depreciation
C) Replacement cost
D) All of the above
Answer: A) Book value
Which of the following statements about salvage value is true?
A) It is always estimated accurately.
B) It can be higher than the initial cost of an asset.
C) It has no impact on depreciation calculations.
D) It remains constant throughout an asset’s life.
Answer: B) It can be higher than the initial cost of an asset.
Salvage value is primarily used in:
A) Calculating the initial cost of an asset
B) Determining the annual revenue of an asset
C) Estimating the depreciation of an asset
D) Assessing the market value of an asset
Answer: C) Estimating the depreciation of an asset
What is the formula for calculating depreciation using the straight-line method?
A) (Cost – Salvage Value) / Useful Life
B) Cost / (Useful Life – Salvage Value)
C) Cost * Useful Life
D) Salvage Value / Useful Life
Answer: A) (Cost – Salvage Value) / Useful Life
Which of the following is true regarding salvage value?
A) It is always equal to the initial cost of an asset.
B) It represents the value of an asset when it is sold.
C) It is disregarded in calculating depreciation.
D) It is estimated at the beginning of an asset’s life.
Answer: B) It represents the value of an asset when it is sold.
Salvage value is an important consideration for businesses primarily because it:
A) Determines the tax implications of an asset’s sale
B) Affects the total cost of ownership of an asset
C) Helps in calculating the initial investment
D) Determines the salvage tax rate for an asset
Answer: B) Affects the total cost of ownership of an asset
If an asset has a salvage value higher than its book value at the end of its useful life, what does this signify?
A) The asset was not used efficiently.
B) The salvage value was overestimated.
C) The asset was not depreciated correctly.
D) The asset has generated more value than anticipated.
Answer: D) The asset has generated more value than anticipated.
Salvage value affects depreciation by:
A) Lowering the annual depreciation expense
B) Increasing the carrying amount of an asset
C) Increasing the total depreciation expense
D) Having no impact on depreciation calculations
Answer: A) Lowering the annual depreciation expense
Which depreciation method is often used to calculate depreciation based on an asset’s usage?
A) Double-declining balance method
B) Units of production method
C) Straight-line method
D) Sum-of-the-years’-digits method
Answer: B) Units of production method
Salvage value is deducted from an asset’s cost to determine:
A) The asset’s market value
B) The asset’s historical cost
C) The asset’s accumulated depreciation
D) The asset’s net book value
Answer: D) The asset’s net book value
Which factor is NOT considered when estimating salvage value?
A) Resale market conditions
B) Initial purchase price
C) Asset’s physical condition
D) Expected maintenance costs
Answer: B) Initial purchase price
Salvage value is an estimate that:
A) Always equals the asset’s market value
B) Changes annually based on depreciation
C) Remains constant throughout the asset’s life
D) Represents the asset’s future worth
Answer: D) Represents the asset’s future worth
Salvage value is also referred to as:
A) Market value
B) Book value
C) Residual value
D) Historical cost
Answer: C) Residual value
How does salvage value impact the depreciation of an asset?
A) Higher salvage value increases depreciation expense.
B) Lower salvage value decreases depreciation expense.
C) Salvage value has no effect on depreciation.
D) Salvage value affects only the first year’s depreciation.
Answer: B) Lower salvage value decreases depreciation expense.
Which method of depreciation assumes that an asset’s loss in value is constant over its useful life?
A) Double-declining balance method
B) Straight-line method
C) Units of production method
D) Sum-of-the-years’-digits method
Answer: B) Straight-line method
Salvage value is deducted from the cost of an asset to calculate:
A) Book value
B) Market value
C) Replacement cost
D) Accumulated depreciation
Answer: A) Book value
An asset with a higher salvage value will have:
A) Higher depreciation expense
B) Lower carrying amount
C) Longer useful life
D) Lower initial cost
Answer: C) Longer useful life
The salvage value of an asset depends on:
A) The asset’s purchase price
B) The asset’s physical condition
C) The asset’s expected market value
D) A and B only
Answer: C) The asset’s expected market value
Which depreciation method allocates higher depreciation expense in the earlier years of an asset’s life?
A) Straight-line method
B) Double-declining balance method
C) Units of production method
D) Sum-of-the-years’-digits method
Answer: B) Double-declining balance method
Salvage value impacts the depreciation rate by:
A) Reducing the total depreciation expense
B) Decreasing the carrying amount of an asset
C) Increasing the initial cost of an asset
D) Not affecting the depreciation rate
Answer: A) Reducing the total depreciation expense
Salvage value estimation involves considering:
A) Historical cost
B) Asset’s marketability
C) Expected useful life
D) All of the above
Answer: D) All of the above
Salvage value is used primarily to:
A) Determine an asset’s purchase price
B) Calculate an asset’s market value
C) Estimate an asset’s future worth
D) Determine an asset’s tax rate
Answer: C) Estimate an asset’s future worth
The salvage value of an asset is also known as its:
A) Market value
B) Book value
C) Residual value
D) Current value
Answer: C) Residual value
When calculating depreciation using the straight-line method, the formula used is:
A) (Cost – Salvage Value) / Useful Life
B) Cost / (Useful Life + Salvage Value)
C) (Cost – Salvage Value) * Useful Life
D) Cost / Useful Life
Answer: A) (Cost – Salvage Value) / Useful Life
Salvage value is deducted from an asset’s cost to calculate:
A) Book value
B) Market value
C) Historical cost
D) Replacement cost
Answer: A) Book value
How does a higher salvage value affect the depreciation expense of an asset?
A) Increases depreciation expense
B) Decreases depreciation expense
C) Has no impact on depreciation expense
D) Makes the asset fully depreciated sooner
Answer: B) Decreases depreciation expense
Which depreciation method assumes that an asset loses value in proportion to the actual usage of the asset?
A) Straight-line method
B) Units of production method
C) Double-declining balance method
D) Sum-of-the-years’-digits method
Answer: B) Units of production method
Salvage value affects an asset’s book value by:
A) Lowering the carrying amount of the asset
B) Increasing the asset’s historical cost
C) Reducing the estimated useful life of the asset
D) Not affecting the asset’s book value
Answer: A) Lowering the carrying amount of the asset
If an asset’s salvage value is higher than its book value at the end of its useful life, what does this indicate?
A) The asset was overestimated initially.
B) The asset was not utilized efficiently.
C) The salvage value was underestimated.
D) The asset generated more value than anticipated.
Answer: D) The asset generated more value than anticipated.
Which of the following is NOT considered when estimating salvage value?
A) Asset’s physical condition
B) Expected useful life
C) Historical cost
D) Resale market conditions
Answer: C) Historical cost
The salvage value of an asset impacts the depreciation rate by:
A) Decreasing the total depreciation expense
B) Increasing the initial cost of the asset
C) Not affecting the depreciation rate
D) Reducing the asset’s carrying amount
Answer: A) Decreasing the total depreciation expense
Salvage value estimation involves considering:
A) Original purchase price
B) Expected market value at the end of an asset’s life
C) Current market conditions
D) All of the above
Answer: D) All of the above
Salvage value is the:
A) Initial cost of an asset
B) Estimated value of an asset at the end of its useful life
C) Value of an asset at the time of purchase
D) Total depreciation of an asset
Answer: B) Estimated value of an asset at the end of its useful life
The primary purpose of salvage value in depreciation calculations is to:
A) Reduce the initial cost of an asset
B) Estimate an asset’s resale value
C) Determine the replacement cost of an asset
D) Lower the annual depreciation expense
Answer: B) Estimate an asset’s resale value
When determining salvage value, which factor(s) are usually considered?
A) Remaining useful life
B) Current market conditions
C) Initial purchase price
D) A and B only
Answer: D) A and B only
Which method of depreciation assumes an equal reduction in an asset’s value per unit of production?
A) Straight-line method
B) Double-declining balance method
C) Units of production method
D) Sum-of-the-years’-digits method
Answer: C) Units of production method
A higher salvage value would result in:
A) Higher annual depreciation expense
B) Lower annual depreciation expense
C) No change in annual depreciation expense
D) Immediate write-off of the asset
Answer: B) Lower annual depreciation expense
Salvage value is used primarily to calculate:
A) The market value of an asset
B) The book value of an asset
C) The replacement cost of an asset
D) The initial cost of an asset
Answer: B) The book value of an asset
Which method of depreciation ignores the salvage value when calculating depreciation expense?
A) Double-declining balance method
B) Units of production method
C) Straight-line method
D) Sum-of-the-years’-digits method
Answer: C) Straight-line method
If an asset’s salvage value is higher than its book value at the end of its useful life, what does this imply?
A) The asset was over-depreciated.
B) The salvage value was underestimated.
C) The asset was underutilized.
D) The asset was overvalued initially.
Answer: A) The asset was over-depreciated.
The salvage value of an asset is used to determine:
A) The tax rate on an asset’s sale
B) The remaining useful life of an asset
C) The net book value of an asset
D) The current market value of an asset
Answer: C) The net book value of an asset
Salvage value estimation involves considering:
A) Historical cost
B) Expected market value at the end of an asset’s life
C) Current market conditions
D) All of the above
Answer: D) All of the above
