Depreciation should be calculated over which of the following?

Depreciation should be calculated over which of the following?

• A. Original Asset Age
• B. Expected Useful Life
• C. Salvage Value Only
• D. Market Value

Answer: (B)

Depreciation is about spreading the asset’s cost over the period it’s expected to be used to generate revenue. That period is the asset’s expected useful life. You compute depreciation by taking the depreciable base (cost minus estimated salvage value) and allocating it over that useful life using your chosen method (e.g., straight-line or accelerated). The salvage value determines how much total depreciation will be charged, not how long the asset’s benefits are recognized. Using the original asset age would ignore how long the asset can still be used, and market value has no bearing on the accounting allocation of cost. So depreciation should be calculated over the asset’s expected useful life.

Depreciation is about spreading the asset’s cost over the period it’s expected to be used to generate revenue. That period is the asset’s expected useful life. You compute depreciation by taking the depreciable base (cost minus estimated salvage value) and allocating it over that useful life using your chosen method (e.g., straight-line or accelerated). The salvage value determines how much total depreciation will be charged, not how long the asset’s benefits are recognized. Using the original asset age would ignore how long the asset can still be used, and market value has no bearing on the accounting allocation of cost. So depreciation should be calculated over the asset’s expected useful life.