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3 cards from this section. Quick, good the night before a test.
What is depreciation?
Think about how businesses track asset values over time.
Is depreciation a cash expense?
Consider how financial statements categorize expenses.
Which of the following statements is true about depreciation?
Think about what happens to assets as they age.
True or False: Depreciation is necessary for maintaining accurate financial statements.
Consider why businesses report their profits.
A factory buys a new machine for $100,000, which is expected to have a useful life of 10 years and a residual value of $10,000. Calculate the annual depreciation and discuss its implications for financial planning.
Use the depreciation formula discussed earlier.
If a company decided to sell an asset worth $50,000 after 5 years with an annual depreciation of $5,000, what would be the book value at the time of sale? Also, discuss how such decisions impact investor perception.
Calculate as before and consider the bigger picture of company strategy.
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