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

8. Long Lived Assets

Depreciation: Summary of Main Methods

Financial Accounting

8. Long Lived Assets

Depreciation: Summary of Main Methods

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Multiple Choice

Total depreciation recorded over an asset's service life is:

Equal to the asset's depreciable cost

Equal to the asset's salvage value

Equal to the asset's original cost

Equal to the accumulated depreciation at the end of the first year

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It reflects the reduction in the value of the asset due to usage, wear and tear, or obsolescence.

Define the term 'depreciable cost': The depreciable cost of an asset is calculated as the original cost of the asset minus its salvage value. Salvage value is the estimated residual value of the asset at the end of its useful life.

Clarify the relationship between total depreciation and depreciable cost: Total depreciation recorded over the asset's service life is equal to the asset's depreciable cost. This is because depreciation is calculated to allocate the entire depreciable cost over the useful life of the asset.

Eliminate incorrect options: The total depreciation cannot be equal to the asset's salvage value, original cost, or accumulated depreciation at the end of the first year. Salvage value is excluded from depreciation calculations, original cost includes salvage value, and accumulated depreciation at the end of the first year only represents one year's depreciation.

Conclude the correct answer: The total depreciation recorded over the asset's service life is equal to the asset's depreciable cost, as this represents the portion of the asset's value that is allocated as an expense over its useful life.