In Which of the Following Situations Should the Named Company

question 24

Multiple Choice

In which of the following situations should the named company not record any depreciation expense on the asset described?

• A) Commuter Airline is required by law to maintain its aircraft in "as good as new" condition.
• B) Metro Advertising owns an office building that has been increasing in value each year since it was purchased.
• C) Computer Sales Company has in inventory a new type of computer designed "never to become obsolete."
• D) None of the above answers is correct―in each case, the named company should record depreciation on the asset described.

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Definitions:

Implicit Costs

Non-monetary opportunity costs, such as time or foregone alternatives, not directly accounted for in financial transactions.

Explicit Costs

Direct, out-of-pocket payments for expenses such as wages, rent, and materials, which are easily quantifiable.

Accountants

Professionals who manage financial records, conduct audits, and ensure tax compliance, playing a pivotal role in financial planning and analysis.

Accounting Profit

The difference between total monetary revenue and total monetary costs, and is calculated by subtracting explicit costs from total revenue.