Which Of The Following Factors Determine Depreciation? (Check All That Apply.)

The correct options of this multiple choice question (mcq) are C, D, E and F as for the calculation of Depreciation, we need the following:

(i). Cost of the Asset

Assets are recorded on balance sheet at Historical Cost i.e., the cost at which the fixed asset was, firstly purchased. This cost includes any additions or any cost incurred to bring the assets into its useable conditions so that these can be used for business operations. For example, If a machinery purchased at the initial cost of $4,000. Wages paid $1,000 for the installation of machinery, then the cost of machinery is equal to $5,000 ($4,000 + $1,000).

(ii). Useful Life

The life of non-current asset during which it is in its usable condition to operate the business operations efficiently and effectively. For example, if the plant & machinery has useful life of 10 years, then, we say that it is usable for business activities and operations for 10 years.

(iii) Residual or Salvage Value

The value of fixed asset which is remained after the expiration of its useful life. For example, if the useful life machinery, then it becomes obsolete after 10 years and it no longer valuable for business use, so, it can be sold out in the market for scrap.

(iv) Book Value

Book value or written down value is the value which is calculated by deducted Accumulated Depreciation from the cost of the non-current asset. This value is required in case of declining balance method or diminishing balance method.

The option A is incorrect choice here as the market value of fixed asset is not required in the calculation of depreciation but the cost of the asset is required.

The option B is incorrect as it shows an increase in the value of non-current asset while depreciation shows a decrease in the value of non-current asset over its useful life.