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Depreciation

The following...

Question

The following statements true or false? Give reasons.
Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation.

A

True

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B

False

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Solution

The correct option is B False
Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation- this is a false statement since only expected obsolescence is considered for determining the amount of depreciation. It has two components: loss of value of fixed assets due to change in technology and change in demand.

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Q. Obsolescence and inadequacy are called _______ factors causing depreciation

Q. __________ has defined depreciation as "a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion of time or obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortization of assets whose useful life is predetermined."

Q. _______ has defined depreciation as "a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion of time of obsolescence through technology and market changes. Depreciation is allocated so as to charge a fair proportion of depreciable amount in each accounting period during the expected useful life of the asset. Depreciation includes amortization of assets whose useful life is predetermined.

Q. Obsolescence of a depreciable asset may be caused by
I. Technological changes
II. Improvement in the production method
III. Legal or other restrictions

Q. Consider the following statements :
A low inventory turnover may be the result of
1. Obsolescence of some of the stock
2. Slow moving inventory
3. Frequent stock-outs
4. Fast-moving inventory
Which of the above statement(s) is/are correct?

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