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

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Multiple Choice

Which of the following will decrease the original basis of property to determine the adjusted basis?

Depreciation expense taken on the property

Assessment for local improvements

Cost of acquiring the property

Additional capital improvements made to the property

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Verified step by step guidance

Understand the concept of 'basis' in property accounting: The original basis of a property is typically the cost of acquiring the property, including purchase price and associated costs. The adjusted basis is calculated by modifying the original basis for certain factors such as depreciation, improvements, and other adjustments.

Identify the factors that decrease the original basis: Depreciation expense is a reduction in the value of the property over time due to wear and tear, obsolescence, or usage. This expense decreases the original basis of the property when calculating the adjusted basis.

Analyze the other options: Assessment for local improvements, cost of acquiring the property, and additional capital improvements made to the property do not decrease the original basis. Instead, they either increase the basis or are part of the original basis calculation.

Apply the rule for adjusted basis calculation: To determine the adjusted basis, subtract depreciation expense from the original basis. Other factors, such as capital improvements, are added to the original basis rather than subtracted.

Conclude the correct adjustment: Depreciation expense taken on the property is the factor that decreases the original basis to determine the adjusted basis.