Question

which of the following statements is correct? multiple choice question. an asset's book value is always less than its selling price. depreciation is not intended to report an asset at its current value. depreciation expense reflects the decrease in the current value of an asset over time. an asset's cost minus its accumulated depreciation is equal to its selling price.

Answer 1

Option (b), which states that depreciation is not meant to report an asset at its present value, is the right response.

What occurs when depreciation reporting?

On the balance sheet, depreciation expense is totaled as cumulative depreciation, but on the income statement, depreciation expense is reported as a regular business item. How quickly a company's assets "wear out" is related to both depreciation and accumulated depreciation.

Why is depreciation ineligible as a valuation method?

Depreciation is a method of accounting that seeks to equitably and sensibly distribute the price of tangible capital assets over the estimated useful life of the asset, less any possibility for salvage (if any). The task at hand is allocation, not valuation.

When is the proper time to report depreciation?

Property and equipment depreciation expense is recorded at the end of each fiscal year and at the time an asset is sold. To document a disposal, cost and amassed depreciation are removed from the record.

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