Question

With respect to financial statements, which of the following statements is true of depreciation?

With respect to financial statements, which of the following statements is true of depreciation? Depreciation can be taken beyond the residual value of the asset. O Land is depreciated on a 25-year schedule. Accumulated depreciation is credited below the referenced asset. The residual value of the asset is determined by the government.

Answer 1

W​​​​​​ith respect to financial statements, accumulated depreciation is credited below the reference asset is the correct option.

Reason:: Accumulated depreciation is the cumulative depreciation of an asset that has been recorded.

Fixed assets are recorded as a Debit on the balance sheet while accumulated depreciation is recorded as a credit offsetting the asset.

Since accumulated depreciation is a credit,the balance sheet can show the original cost of the asset and the accumulated depreciation so far.

Why other options are incorrect?

1)  ​​​​​​Accumulated depreciation cannot exceed an assets cost.

2)Land is not depreciated because land is assumed to have an unlimited useful life.

4) Residual value of an asset is determined by considering the estimated amount that an assets owner would earn by disposing of asset less any disposal cost...And not by government..

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