Question

Which of the following statements is true?

A. To determine the book value of a long-term asset, the balance in the accumulated depreciation account must be subtracted from cost of the asset.

B. Accumulated depreciation is a contra asset account.

C. The amount of depreciation expense recognized each year is added to the beginning balance of accumulated depreciation account to determine the ending balance of the account.

D. All of the statements are true.

Answer 1

All of the provided statements are true regarding the book value, accumulated depreciation, and depreciation expense for a long-term asset.

Step-by-step explanation:

The question pertains to understanding the concept of book value of a long-term asset, the role of accumulated depreciation, and the nature of the depreciation expense. All the statements presented in the question are true.

• To determine the book value of a long-term asset, you must subtract the balance in the accumulated depreciation account from the cost of the asset.
• Accumulated depreciation is indeed a contra asset account, which means it has a normal credit balance and is used to decrease the value of the asset account to which it relates.
• The depreciation expense recognized each year is added to the beginning balance of accumulated depreciation to determine the ending balance of the account. This process reflects the cumulative amount of depreciation that has been charged against the asset over its life.