MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO SALVAGE VALUE AND SCRAP VALUE
What is salvage value in India?
A) The value of an asset at the end of its useful life
B) The value of an asset when it is sold for reuse or recycling
C) The initial cost of an asset
D) The value of an asset when it is disposed of as scrap
Correct answer: B) The value of an asset when it is sold for reuse or recycling
Which of the following factors affect the salvage value of an asset in India?
A) Age of the asset
B) Market demand for the asset
C) Condition of the asset
D) All of the above
Correct answer: D) All of the above
What is scrap value?
A) The value of an asset when it is sold for reuse
B) The value of an asset when it is sold for recycling
C) The value of an asset when it is disposed of as waste
D) The value of an asset when it is purchased new
Correct answer: C) The value of an asset when it is disposed of as waste
In India, salvage value and scrap value are:
A) Always equal
B) Usually equal
C) Sometimes equal
D) Rarely equal
Correct answer: C) Sometimes equal
What happens to the salvage value of an asset over its useful life in India?
A) It increases
B) It decreases
C) It remains constant
D) It fluctuates
Correct answer: B) It decreases
Which of the following is an example of an asset with significant salvage value in India?
A) Old machinery
B) Computers
C) Vehicles
D) Paper waste
Correct answer: A) Old machinery
How is salvage value typically estimated in India?
A) Based on the initial cost of the asset
B) Based on historical data and market trends
C) Based on the age of the asset
D) Based on the condition of the asset
Correct answer: B) Based on historical data and market trends
Which term refers to the amount received for an asset when it is sold at the end of its useful life?
A) Salvage value
B) Scrap value
C) Depreciated value
D) Market value
Correct answer: A) Salvage value
What is the primary purpose of considering salvage value in India?
A) To determine taxation
B) To calculate depreciation
C) To estimate the resale value of assets
D) To assess the market value of assets
Correct answer: B) To calculate depreciation
Which of the following is NOT typically considered when determining salvage value in India?
A) Market demand
B) Asset’s purchase price
C) Asset’s condition
D) Asset’s location
Correct answer: D) Asset’s location
How does salvage value differ from scrap value in India?
A) Salvage value is higher than scrap value
B) Salvage value is lower than scrap value
C) Salvage value and scrap value are the same
D) Salvage value is determined after considering scrap value
Correct answer: D) Salvage value is determined after considering scrap value
Which accounting principle requires the consideration of salvage value in India?
A) Matching principle
B) Revenue recognition principle
C) Cost principle
D) Conservatism principle
Correct answer: A) Matching principle
In India, which of the following assets is likely to have the highest salvage value?
A) Electronic appliances
B) Furniture
C) Land
D) Heavy machinery
Correct answer: C) Land
What is the salvage value ratio?
A) Salvage value divided by the original cost
B) Original cost divided by salvage value
C) Salvage value multiplied by the original cost
D) Salvage value plus original cost
Correct answer: A) Salvage value divided by the original cost
Which method is commonly used to calculate salvage value in India?
A) Straight-line method
B) Double-declining balance method
C) Units of production method
D) Market value method
Correct answer: D) Market value method
When might an asset have a higher scrap value than salvage value in India?
A) When it is sold for recycling purposes
B) When it is sold for reuse
C) When it is disposed of as waste
D) When it is refurbished for resale
Correct answer: C) When it is disposed of as waste
Which of the following factors does NOT typically influence salvage value in India?
A) Economic conditions
B) Technological advancements
C) Asset’s original cost
D) Legal regulations
Correct answer: C) Asset’s original cost
What is the impact of salvage value on depreciation expense in India?
A) Higher salvage value leads to lower depreciation expense
B) Higher salvage value leads to higher depreciation expense
C) Salvage value has no impact on depreciation expense
D) Depreciation expense is independent of salvage value
Correct answer: A) Higher salvage value leads to lower depreciation expense
Which depreciation method is affected the most by changes in salvage value in India?
A) Straight-line method
B) Declining balance method
C) Units of production method
D) Sum-of-the-years-digits method
Correct answer: A) Straight-line method
In India, salvage value is used to calculate:
A) Book value
B) Market value
C) Replacement cost
D) Residual value
Correct answer: D) Residual value
Which of the following is NOT a factor affecting the salvage value of an asset in India?
A) Market demand
B) Age of the asset
C) Asset’s depreciation method
D) Condition of the asset
Correct answer: C) Asset’s depreciation method
Which type of assets typically have a salvage value close to zero in India?
A) Real estate properties
B) Vehicles
C) Machinery
D) Computers
Correct answer: D) Computers
Salvage value is considered in the calculation of:
A) Gross profit
B) Net profit
C) Operating income
D) Earnings before interest and taxes (EBIT)
Correct answer: C) Operating income
How does salvage value affect the calculation of return on investment (ROI) in India?
A) Higher salvage value increases ROI
B) Higher salvage value decreases ROI
C) Salvage value has no effect on ROI
D) ROI is inversely proportional to salvage value
Correct answer: A) Higher salvage value increases ROI
Which of the following methods involves estimating the salvage value as a percentage of the asset’s initial cost in India?
A) Market value method
B) Percentage of completion method
C) Straight-line method
D) Residual value method
Correct answer: D) Residual value method
What is the primary purpose of estimating salvage value in India?
A) To determine asset appreciation
B) To calculate taxes
C) To assess asset disposal options
D) To determine asset insurance premiums
Correct answer: C) To assess asset disposal options
Salvage value is recorded on the balance sheet of a company in India as:
A) Current asset
B) Long-term asset
C) Contra asset
D) Intangible asset
Correct answer: C) Contra asset
Which of the following depreciation methods does not consider salvage value in India?
A) Straight-line method
B) Double-declining balance method
C) Units of production method
D) Sum-of-the-years-digits method
Correct answer: B) Double-declining balance method
Which financial statement in India reflects the impact of salvage value?
A) Income statement
B) Balance sheet
C) Cash flow statement
D) Statement of retained earnings
Correct answer: B) Balance sheet
How does salvage value impact the calculation of taxes in India?
A) Higher salvage value increases tax liability
B) Higher salvage value decreases tax liability
C) Salvage value has no impact on taxes
D) Taxation is based solely on salvage value
Correct answer: A) Higher salvage value increases tax liability
When estimating salvage value in India, which of the following is NOT typically considered?
A) Salvage value of similar assets
B) Historical salvage values
C) Future market trends
D) Initial purchase price
Correct answer: D) Initial purchase price
What is the salvage value of an asset that has been fully depreciated in India?
A) Zero
B) Original cost
C) Market value
D) Scrap value
Correct answer: A) Zero
In India, scrap value is commonly associated with which stage of an asset’s life cycle?
A) Acquisition
B) Utilization
C) Maintenance
D) Disposal
Correct answer: D) Disposal
How does salvage value affect the calculation of net book value in India?
A) Higher salvage value increases net book value
B) Higher salvage value decreases net book value
C) Salvage value is not included in net book value
D) Net book value is equal to salvage value
Correct answer: B) Higher salvage value decreases net book value
Which of the following depreciation methods is commonly used for assets with significant salvage value in India?
A) Units of production method
B) Sum-of-the-years-digits method
C) Declining balance method
D) Straight-line method
Correct answer: C) Declining balance method
What happens to salvage value over time in India?
A) It remains constant
B) It increases
C) It decreases
D) It fluctuates
Correct answer: C) It decreases
How does salvage value affect the calculation of depreciation expense in India?
A) Higher salvage value increases depreciation expense
B) Higher salvage value decreases depreciation expense
C) Salvage value has no impact on depreciation expense
D) Depreciation expense is equal to salvage value
Correct answer: B) Higher salvage value decreases depreciation expense
Which of the following factors can increase salvage value in India?
A) Technological obsolescence
B) Wear and tear
C) Market demand for the asset
D) Legal restrictions on disposal
Correct answer: C) Market demand for the asset
In India, what is the purpose of estimating salvage value when acquiring assets?
A) To negotiate a lower purchase price
B) To determine the useful life of the asset
C) To estimate the total cost of ownership
D) To assess the asset’s contribution to revenue
Correct answer: C) To estimate the total cost of ownership
How does salvage value affect the calculation of depreciation tax shield in India?
A) Higher salvage value increases depreciation tax shield
B) Higher salvage value decreases depreciation tax shield
C) Salvage value has no impact on depreciation tax shield
D) Depreciation tax shield is independent of salvage value
Correct answer: A) Higher salvage value increases depreciation tax shield
Which depreciation method is based on the assumption that the asset will have no salvage value at the end of its useful life in India?
A) Double-declining balance method
B) Units of production method
C) Straight-line method
D) Residual value method
Correct answer: A) Double-declining balance method
What is the term used for the process of estimating the salvage value of an asset in India?
A) Depreciation
B) Amortization
C) Impairment
D) Salvage appraisal
Correct answer: D) Salvage appraisal
Which of the following methods is NOT used to estimate salvage value in India?
A) Market value method
B) Replacement cost method
C) Residual value method
D) Straight-line method
Correct answer: B) Replacement cost method
How does salvage value impact the calculation of asset retirement obligations in India?
A) Higher salvage value increases obligations
B) Higher salvage value decreases obligations
C) Salvage value has no impact on obligations
D) Asset retirement obligations are equal to salvage value
Correct answer: B) Higher salvage value decreases obligations
Which of the following is an example of a factor that may decrease salvage value in India?
A) High demand for the asset in the market
B) Advances in technology
C) Long-term maintenance contracts
D) Strong legal protections for asset disposal
Correct answer: B) Advances in technology
Which financial metric considers salvage value when evaluating the return on investment in India?
A) Payback period
B) Internal rate of return
C) Return on assets
D) Net present value
Correct answer: C) Return on assets
What is the impact of salvage value on the calculation of depreciation reserves in India?
A) Higher salvage value increases reserves
B) Higher salvage value decreases reserves
C) Salvage value has no impact on reserves
D) Depreciation reserves are equal to salvage value
Correct answer: A) Higher salvage value increases reserves
In India, which of the following statements is true regarding scrap value?
A) It is always higher than salvage value
B) It is used primarily for taxation purposes
C) It represents the value of an asset at the end of its useful life
D) It is obtained when an asset is sold for recycling or disposal
Correct answer: D) It is obtained when an asset is sold for recycling or disposal
How does salvage value affect the calculation of net income in India?
A) Higher salvage value increases net income
B) Higher salvage value decreases net income
C) Salvage value has no impact on net income
D) Net income is equal to salvage value
Correct answer: A) Higher salvage value increases net income
Which accounting standard in India provides guidelines for the treatment of salvage value in financial statements?
A) Indian Accounting Standard (Ind AS) 16 – Property, Plant and Equipment
B) Indian Accounting Standard (Ind AS) 36 – Impairment of Assets
C) Indian Accounting Standard (Ind AS) 10 – Events after the Reporting Period
D) Indian Accounting Standard (Ind AS) 37 – Provisions, Contingent Liabilities and Contingent Assets
Correct answer: A) Indian Accounting Standard (Ind AS) 16 – Property, Plant and Equipment
