Which of the Following Must Be Considered in Estimating Depreciation

question 3

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 value
• D) Both the original cost of the asset and its useful life.

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Definitions:

Market Risk

Market risk is the potential for investors to experience losses due to factors that affect the overall performance of the financial markets, such as economic recessions or interest rate changes.

Inflation

The pace at which the average cost of products and services escalates, causing the value of money to diminish.

Interest Rates

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage rate.

Beta

A measure of the volatility, or systematic risk, of a security or portfolio compared to the market as a whole.