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

In the context of depreciation, the depreciable cost of an asset is calculated as:

Asset's cost minus its estimated residual (salvage) value

Asset's cost plus its estimated residual (salvage) value

Asset's cost minus accumulated depreciation

Asset's cost divided by its useful life

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Verified step by step guidance

Understand the concept of depreciable cost: Depreciable cost refers to the portion of an asset's cost that is subject to depreciation over its useful life. It excludes the residual (salvage) value, which is the estimated value of the asset at the end of its useful life.

Identify the formula for calculating depreciable cost: The formula is: Depreciable Cost = Asset's Cost - Estimated Residual (Salvage) Value.

Clarify why residual (salvage) value is subtracted: Residual value represents the portion of the asset's cost that is not depreciated because it is expected to be recovered at the end of the asset's useful life.

Eliminate incorrect options: Review the other options provided in the problem. For example, 'Asset's cost plus its estimated residual value' is incorrect because adding residual value would inflate the depreciable cost. Similarly, 'Asset's cost minus accumulated depreciation' and 'Asset's cost divided by its useful life' do not align with the definition of depreciable cost.

Apply the formula to calculate the depreciable cost: Subtract the estimated residual (salvage) value from the asset's cost using the formula provided in step 2. This will give you the depreciable cost of the asset.