Each year a company has been investing an increasingly greater amount in machinery.Since there is a large
Question:
Each year a company has been investing an increasingly greater amount in machinery.Since there is a large number of small items with relatively similar useful lives, thecompany has been applying straight-line depreciation at a uniform rate to the machineryas a group. The ratio of this group's total accumulated depreciation to the total cost of themachinery has been steadily increasing and now stands at .75 to 1.00. The most likelyexplanation for this increasing ratio is the
a. company should have been using one of the accelerated methods of depreciation.
b. estimated average life of the machinery is less than the actual average useful life.
c. estimated average life of the machinery is greater than the actual average useful life.
d. company has been retiring fully depreciated machinery that should have remained inservice.
Can you explain me why b is the correct answer?
Expert Answer:
Depreciation is an expense of the company for using the fixed assets because these assets lose their ... View the full answer
