10. What is the underlying principle that supports depreciating long-term assets
ID: 2718721 • Letter: 1
Question
10. What is the underlying principle that supports depreciating long-term assets over their useful lives instead of just expensing them when purchased? A. We want full disclosure of large cash expenditures. B. We want to show that the business will be viable for many years. C. The expense would be too much to appear on our income statement all at once. D. These assets will help us to generate revenues over long-term periods of time, so we want to match revenues with the applicable cost of doing business (depreciation expense).
Explanation / Answer
D. These assets will help us to generate revenues over long-term periods of time, so we want to match revenues with the applicable cost of doing business (depreciation expense).
Since the economic benefits of long term assets are for more than 1 year they are depreciated instead of expensing.
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