Asked by Taran Thiara on Jun 03, 2024
Verified
Financial analysts can make comparisons between the long-lived assets of two companies,both of which use straight-line depreciation,by computing the average useful life of assets with which one of the following formulas?
A) Net depreciable property,plant,and equipment/average useful life.
B) Gross depreciable property,plant,and equipment/average useful life.
C) Gross depreciable property,plant,and equipment/straight-line depreciation expense.
D) Straight-line depreciation expense/net depreciable property,plant,and equipment.
Straight-Line Depreciation
Straight-line depreciation is a method of allocating the cost of a tangible asset over its useful life evenly.
Gross Depreciable
The total cost or value of an asset that is subject to depreciation over its useful life.
- Understand the aspects that influence the carrying valuation of long-duration assets and the impact of differing depreciation methods adopted.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
C
Explanation :
C) Gross depreciable property, plant, and equipment / straight-line depreciation expense is the correct formula for computing the average useful life of assets when companies use straight-line depreciation. This formula gives an estimate of how many years it takes for the assets to be depreciated, which is a direct reflection of their useful life.
Learning Objectives
- Understand the aspects that influence the carrying valuation of long-duration assets and the impact of differing depreciation methods adopted.