Question

$Depreciation=\frac{\text{Cost of Asset less Scrap Value}}{\text{Estimated Working \_\_\_\_\_\_\_\_\_\_\_\_ of Asset}}$.

• A. Life
• B. Hours
• C. Days
• D. Months

Answer 1

The correct option is A Life

Depreciation expense under straight line method is calculated by dividing the depreciable amount of the fixed asset by the useful life of the asset.

Depreciation expense = (Depreciable amount) / Useful life

Depreciable amount equals cost minus salvage value. Cost is the amount at which the fixed asset is capitalized. Salvage value (also called residual value or scrap value) is the estimated value of the fixed asset at the end of its useful life.

Since an amount equal to the salvage value can be recovered by selling the asset, only the difference between the cost and the salvage value is depreciated.

Useful life of a fixed asset represents the number of accounting periods within which the asset is expected to generate economic benefits.