Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Adjusting Entries: Depreciation

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Depreciation

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

What effect does the residual value have on a long-lived asset's depreciable cost?

It is only considered when the asset is sold, not during depreciation.

It increases the depreciable cost by being added to the asset's cost.

It has no effect on the depreciable cost.

It reduces the depreciable cost by being subtracted from the asset's cost.

Previous problemNext problem

Verified step by step guidance

Understand the concept of depreciable cost: Depreciable cost is the portion of an asset's cost that is allocated as an expense over its useful life. It is calculated as the difference between the asset's original cost and its residual value.

Define residual value: Residual value (also known as salvage value) is the estimated amount that an asset is expected to be worth at the end of its useful life. This value is subtracted from the asset's cost to determine the depreciable cost.

Apply the formula for depreciable cost: The formula is:

Depreciable Cost = Asset Cost - Residual Value

. This shows that the residual value reduces the amount of cost that is depreciated over the asset's useful life.

Clarify the impact of residual value: Since the residual value is subtracted from the asset's cost, it reduces the total amount of cost that is allocated as depreciation expense over time.

Conclude the explanation: The correct answer is that the residual value reduces the depreciable cost by being subtracted from the asset's cost. This ensures that only the portion of the asset's cost that is expected to be used up during its useful life is depreciated.