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

Which of the following accounts is subject to depreciation?

Prepaid Insurance

Accounts Receivable

Inventory

Equipment

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It applies to assets that are used in operations and have a finite life, such as equipment, buildings, and vehicles.

Review the nature of each account listed: Prepaid Insurance is a current asset representing payments made in advance for insurance coverage. Accounts Receivable is a current asset representing amounts owed by customers. Inventory is a current asset representing goods held for sale. Equipment is a tangible fixed asset used in operations.

Identify the type of account that qualifies for depreciation: Depreciation applies to tangible fixed assets, not current assets like Prepaid Insurance, Accounts Receivable, or Inventory.

Confirm that Equipment is subject to depreciation: Equipment is a tangible fixed asset with a finite useful life, making it eligible for depreciation under accounting standards.

Conclude that Equipment is the correct answer: Equipment is the only account listed that meets the criteria for depreciation, as it is a tangible fixed asset used in operations.