The board of directors of Fiberglass Structures, Inc., is reviewing the 20X7 annual report. A new board member-a wealthy woman with little business experience-questions the company accountant about the depreciation amounts. The new board member wonders why depreciation expense has decreased from $200,000 in 20X6 to $184,000 in 20X7 to $172,000 in 20X8. She states that she could understand the decreasing annual amounts if the company had been disposing of properties each year, but that has not occurred. Further, she notes that growth in the city is increasing the values of company properties. Why is the company recording depreciation when the property values are increasing?
Required
Write a paragraph or 2 to explain the concept of depreciation to the new board member and to answer her questions