Which Statement Is Not Correct

question 59

Multiple Choice

Which statement is not correct?

• A) If an asset is scrapped as worthless before it is fully depreciated its original cost represents an expense on disposal.
• B) If an asset is scrapped as worthless before it is fully depreciated its carrying amount represents an expense on disposal.
• C) An amount paid to remove an asset that is scrapped before it is fully depreciated is an addition to the expense recorded on its disposal.
• D) When an asset is scrapped during the year an entry should be made to record depreciation expense for the portion of the year before scrapping.

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Definitions:

Branch Decision Tree Analysis

A systematic, graphical approach to evaluating all possible alternatives in decision-making, representing outcomes, resources, costs, and utility.

Cost of Capital

A rephrasing: The minimum return that a company must earn on existing asset base to satisfy its creditors, owners, and other providers of capital.

NPV

Net Present Value; a calculation used to assess the value of a project or investment by determining the present value of future cash flows.

Certainty Equivalent Factors

Refers to adjustments made to uncertain (risky) cash flows to equate them to certain cash flows, used in investment decision-making.