Which statement is not true regarding a straight life policy

Asked by wiki @ in Business viewed by 620 People

Which of the following is not true regarding Depreciation? Group of answer choices Depreciation allocates the cost of a fixed asset over its estimated life. Depreciation expense reflects the decrease in market value each year. Depreciation is an allocation not a valuation method. Depreciation expense does not measure changes in market value.

Answered by wiki @

Answer: Depreciation expense reflects the decrease in market value each year.

Explanation:

Depreciation is the decrease in the value of an asset due to the passage of time. Overtime, the value of machineries reduce as a result of usage. Depreciation is therefore the reduction in the value of assets. Depreciation is also the method used tin reallocating the cost of a tangible assets over its useful life span. Firms depreciate assets for accounting and tax purposes. The reduction in the value of an asset has am effect on the balance sheet of an entity.

The answer to the question is the second option. Depreciation does not have anything to do with the market value. Other options are correct except for the second option which states that depreciation expense reflects the decrease in market value each year.

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