Skip to content

CSEET · Fundamentals of Accounting · Depreciation and Amortization

Under the units of production method of depreciation, as described in AS 10, what happens to the depreciation charge for a period in which the machine is idle and produces nothing?

Under the units of production method the depreciation charge can be zero in a period with no production. The method allocates the depreciable amount according to expected use or output, so when nothing is produced, no depreciation is charged for that period.

  1. AThe charge can be zero because it is based on expected use or outputCorrect
  2. BThe charge equals the straight-line amount for the year
  3. CThe charge equals the diminishing balance amount for the year
  4. DThe charge is doubled in the next period only

Explanation

AS 10 states that under usage methods of depreciation the charge can be zero while there is no production. The units of production method links the charge to expected use or output. Straight-line and diminishing balance are time-based, so they would still give a charge.

Did you get it right without looking?

One question tells you little. A timed set on Depreciation and Amortization shows your real accuracy, how long you take and where you lose marks.

Practise Depreciation and AmortizationFree diagnostic mock

More Depreciation and Amortization questions