A company should depreciate a long-lived tangible asset to:
A)match part of the cost of the asset with the revenues generated by the asset.
B)record the decrease in the market value of the asset as it gets older.
C)report less income and pay less income tax.
D)decrease the total value of its assets,so that it can justify buying new ones.

Question

Quizplus · Accepted Answer

Depreciation is the allocation of existing costs that were already recorded as a long-lived asset.Think of the cost of a long-lived asset as a big prepayment for future benefits.As that asset is used,those prepaid benefits are used up,so the asset needs to be decreased each period.This decrease in the asset creates an expense,which is reported on the income statement and matched against the revenue generated by the asset,as required by GAAP.

A Company Should Depreciate a Long-Lived Tangible Asset To