Why Is the Balance in the Depreciation Expense Account Generally

question 40

Multiple Choice

Why is the balance in the Depreciation Expense account generally different from the balance in the Accumulated Depreciation account?

• A)The adjusting entry contains a different amount for Depreciation Expense and Accumulated Depreciation.
• B)The Accumulated Depreciation account contains the value of the long-lived asset as well as the depreciation.
• C)Depreciation expense only reflects the current period depreciation.Accumulated Depreciation contains depreciation since the asset was purchased.
• D)The balances in the two accounts should be the same amount.

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Definitions:

Cash Flows

The comprehensive total of monetary transactions entering and leaving a business, chiefly affecting its cash position.

Stand-Alone Project

A specific investment or project considered in isolation from a company's other projects, evaluated based on its own merits.

IRR

Internal Rate of Return, a metric used in financial analysis to estimate the profitability of potential investments.

Cost of Capital

The minimum return that an enterprise must earn on its investments for the value of the firm to remain unchanged, considered in project evaluations and pricing.