18.3 - Characteristics of Depreciation
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Practice Questions
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What is depreciation?
💡 Hint: Think about how businesses track asset values over time.
Is depreciation a cash expense?
💡 Hint: Consider how financial statements categorize expenses.
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Interactive Quizzes
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Which of the following statements is true about depreciation?
💡 Hint: Think about what happens to assets as they age.
True or False: Depreciation is necessary for maintaining accurate financial statements.
💡 Hint: Consider why businesses report their profits.
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Challenge Problems
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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.
💡 Hint: 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.
💡 Hint: Calculate as before and consider the bigger picture of company strategy.
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