Which of the Following Is True of Depreciation Accounting

question 21

Multiple Choice

Which of the following is true of depreciation accounting?

• A) It is not a matter of valuation.
• B) It is part of the matching of revenues and expenses.
• C) It retains funds by reducing income taxes and dividends.
• D) All of these answer choices are correct.

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Definitions:

Fair Market Value

The price at which an asset would change hands between a willing buyer and seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Commercial Substance

A transaction has commercial substance if it significantly changes the economic position or cash flows of the entity.

Future Cash Flows

The projected cash receipts and payments a company expects over a future period, essential for investment and financial planning.

Patent Account

An account on the balance sheet that represents the cost of purchasing patents or the expenses incurred in securing patents.