The Difference Between the Historical Cost and the Net Book

question 3

Multiple Choice

The difference between the historical cost and the net book value (NBV) of a plant asset is the:

• A)Residual value of the asset.
• B)Depreciation expense for the current period.
• C)An estimate of the remaining life of the asset.
• D)Accumulated depreciation expense of the asset.
• E)Estimated replacement cost of the asset.

---

Definitions:

Straight-line Method

A method of calculating depreciation and amortization by evenly spreading the cost over the useful life of an asset.

Personal Property

Tangible items and assets (excluding real estate) owned by an individual or business, such as vehicles, jewelry, and equipment.

Standard Deduction

A set amount deducted from taxable income that reduces the amount of income subject to tax, available to all taxpayers who do not itemize deductions.

AMT Purposes

Relates to calculations and exceptions specific to the Alternative Minimum Tax, aiming to prevent high-income taxpayers from avoiding substantial tax payments.