Which Kind of Depreciation Is the TRUE Deterioration in the Value

question 9

Multiple Choice

Which kind of depreciation is the TRUE deterioration in the value of capital in each period of time?

• A) depreciation credits
• B) depreciation allowances
• C) economic depreciation
• D) depreciation schedule

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Definitions:

Inventory

The tangible property held for sale in the normal course of business, or to be used in producing goods or services.

Lower of Cost

An accounting principle that adjusts the value of an inventory or asset to the lower of its historical cost or its market value.

Net Realizable Value

The estimated selling price of goods minus the costs of their sale or disposal.

Conservatism Constraint

An accounting principle that provides guidance for uncertain conditions, advising to recognize expenses and liabilities sooner rather than later.