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: Straight Line

Financial Accounting

8. Long Lived Assets

Depreciation: Straight Line

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

In the context of straight-line depreciation, the depreciable cost is:

The asset's cost minus its estimated residual (salvage) value

The asset's cost divided by its useful life

The asset's cost plus accumulated depreciation

The asset's cost minus accumulated depreciation

Previous problemNext problem

Verified step by step guidance

Understand the concept of straight-line depreciation: It is a method of allocating the cost of an asset evenly over its useful life. The formula for straight-line depreciation is: \( \text{Depreciation Expense} = \frac{\text{Depreciable Cost}}{\text{Useful Life}} \).

Define 'depreciable cost': Depreciable cost is the portion of the asset's cost that will be allocated as depreciation over its useful life. It is calculated as \( \text{Depreciable Cost} = \text{Asset's Cost} - \text{Estimated Residual Value} \).

Clarify the term 'residual value': Residual value (also known as salvage value) is the estimated value of the asset at the end of its useful life, assuming it is sold or disposed of.

Eliminate incorrect options: The asset's cost divided by its useful life refers to the depreciation expense per period, not the depreciable cost. The asset's cost plus accumulated depreciation and the asset's cost minus accumulated depreciation are not relevant to the calculation of depreciable cost.

Conclude the correct formula: The depreciable cost is calculated as the asset's cost minus its estimated residual (salvage) value, which aligns with the definition provided in step 2.