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 is NOT a relevant factor in computing depreciation for a fixed asset?

Residual (salvage) value of the asset

Market value of the asset at the end of each year

Estimated useful life of the asset

Acquisition cost of the asset

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is the systematic allocation of the cost of a fixed asset over its useful life. It is based on factors that help estimate the asset's value reduction over time.

Identify the relevant factors for computing depreciation: These include the acquisition cost of the asset, the estimated useful life of the asset, and the residual (salvage) value of the asset. These factors are used in formulas like the straight-line method or declining balance method.

Clarify why residual (salvage) value is relevant: Residual value represents the estimated value of the asset at the end of its useful life. It is subtracted from the acquisition cost to determine the depreciable amount.

Explain why market value at the end of each year is NOT relevant: Depreciation calculations are based on estimates made at the time of acquisition, not on fluctuating market values during the asset's life. Market value is not used in standard depreciation methods.

Conclude that the correct answer is 'Market value of the asset at the end of each year,' as it does not influence the computation of depreciation for a fixed asset.