Question

what are some of the variables that make a plant asset useful life difficult to predict?

Answer 1

Depreciation refers to the process of allocation of the cost of a plant asset to expense in the financial periods benefiting from its usage. The main factors in this process are: asset's cost, salvage value and useful life. However the variables that make the process difficult to predict are inadequacy, wear and tear, obsolescence. The wear and tear hinders the plant asset from indefinitely performance thus are difficult to predict. Inadequacy is the insufficient capacity of the plant assets in a company to achieve the growing productive demands. Obsolescence is the asset becoming outdated and no longer useful in production of goods and services. It is difficult to predict them because the timing of change in demand, new innovations and improvements is unknown.