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

A poor floor plan is an example of which type of depreciation?

Accelerated depreciation

External obsolescence

Physical deterioration

Functional obsolescence

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Verified step by step guidance

Understand the concept of depreciation: Depreciation refers to the reduction in the value of an asset over time due to various factors such as wear and tear, obsolescence, or external conditions.

Learn about functional obsolescence: Functional obsolescence occurs when an asset becomes less useful or desirable due to outdated design, poor layout, or inefficiencies in functionality, even if the asset is physically intact.

Identify the characteristics of a poor floor plan: A poor floor plan is an example of functional obsolescence because it reduces the usability or desirability of a property due to its design flaws, making it less appealing to potential users or buyers.

Differentiate functional obsolescence from other types of depreciation: Accelerated depreciation refers to a method of accounting for asset value reduction more quickly, physical deterioration refers to wear and tear over time, and external obsolescence refers to factors outside the property (e.g., neighborhood decline).

Conclude that a poor floor plan aligns with functional obsolescence: Since the issue stems from the design and layout of the property, it is categorized as functional obsolescence rather than physical deterioration or external obsolescence.