Question

None, since under all depreciation methods, the maximum amount of accumulated depreciation cannot exceed depreciable cost

True
False

Answer 1

In accounting, the maximum amount of accumulated depreciation can exceed the depreciable cost in certain depreciation methods.

Step-by-step explanation:

In accounting, the statement in the given question is false. The maximum amount of accumulated depreciation can exceed the depreciable cost in some depreciation methods. One such method is the accelerated depreciation method, which allows for higher depreciation charges in the early years of an asset's life. This results in the accumulated depreciation exceeding the depreciable cost.

For example, let's say a company purchased a machine for $10,000 with a useful life of 5 years and no salvage value. Using the double-declining balance method, the depreciation expense for year 1 would be (2/5) x $10,000 = $4,000. The accumulated depreciation at the end of year 1 would be $4,000. Consequently, it has already exceeded the depreciable cost of $10,000.

Therefore, it is important to note that under certain depreciation methods, the maximum amount of accumulated depreciation can exceed depreciable cost.