The factors that need to be determined to compute depreciation are an asset's:
A) Cost, residual value, and physical life.
B) Cost, replacement value, and service life.
C) Fair value, residual value, and economic life.
D) Cost, residual value, and service life.

Question

Quizplus · Accepted Answer

Depreciation is determined by an asset's cost, residual value (the expected value of the asset at the end of its useful life), and service life (the number of years or amount of usage expected from the asset before it becomes obsolete or unusable). Choice A is close but physical life is interchangeable with service life. Choice B is incorrect because replacement value is not a determining factor for computing depreciation. Choice C is incorrect because fair value and economic life are not factors used in calculating depreciation.

The Factors That Need to Be Determined to Compute Depreciation