Which of the Following Must Be Considered in Estimating Depreciation

question 47

Multiple Choice

Which of the following must be considered in estimating depreciation on an asset for an accounting period?

• A)The original cost of the asset
• B)Its useful life
• C)The decline of its fair market value
• D)Both the original cost of the asset and its useful life.

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Definitions:

Investment

The allocation of resources (such as capital or time) with the expectation of receiving future returns.

Fair Value

The price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Unrealized Profits

Profits that have occurred on paper due to an asset's increased value but have not yet been cashed in by selling the asset.

Realized Profits

Refers to the gains earned and received from the sale of assets or investments, distinguished from those merely existing on paper.