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Total Assets to Debt Ratio

Total depreci...

Question

Total depreciation during the life cannot exceed _____________.

A

its book value

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B

its replacement value

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C

its depreciable value

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D

market value

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Solution

The correct option is D its depreciable value
The main purpose of depreciation is to reduce the value of an asset over its useful life in such a systematic way that such reduction corresponds with the rate at which depreciation is charged. So the total depreciation over the period of use or simply accumulated depreciation cannot exceed the net book value of the asset or depreciable value.

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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. __________ 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."

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