Question

The IRS assumes that Equipment and Buildings have limited lifespans. What is the term for this?

a) Amortization
b) Depreciation
c) Appreciation
d) Accrual

Answer 1

Depreciation is the term for the assumption that Equipment and Buildings have limited lifespans.

Step-by-step explanation:

The term for the assumption that Equipment and Buildings have limited lifespans is Depreciation.

Depreciation is a method used by the Internal Revenue Service (IRS) to allocate the cost of assets over their estimated useful lives. This allows businesses to deduct a portion of the cost each year as an expense.

For example, if a company purchases a machine for $10,000 and estimates its useful life to be 5 years, it can depreciate $2,000 ($10,000/5) each year for tax purposes.