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

An asset is said to be fully depreciated when:

it has been held for more than five years

it is no longer physically usable

its book value equals its estimated salvage value

its market value drops to zero

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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 reflects the wear and tear, obsolescence, or reduction in value of the asset over time.

Identify the key terms in the problem: 'Fully depreciated' means that the asset's book value (its value on the accounting records) has been reduced to its estimated salvage value (the expected residual value at the end of its useful life).

Clarify the distinction between book value and market value: Book value is the value of the asset as recorded in the accounting books, while market value is the price the asset could fetch in the open market. Depreciation affects book value, not market value.

Evaluate the options provided: The correct condition for an asset to be fully depreciated is when its book value equals its estimated salvage value. This means the asset has been depreciated to the point where no further depreciation expense will be recorded.

Conclude that the other options are incorrect: The length of time the asset has been held, its physical usability, or its market value dropping to zero are not criteria for determining whether an asset is fully depreciated.