Final answer:
The statement is true; the total depreciation of an asset over its life must not exceed its cost minus its estimated salvage value. Depreciation reflects the asset's gradual loss in value and should match its use up to its salvage value by the end of its useful life.
Step-by-step explanation:
The statement Total depreciation over an asset's life cannot exceed an amount equal to cost minus estimated salvage value is true. Depreciation is the process of allocating the cost of tangible assets over their useful lives and reflects the decrease in the value of an asset as a result of wear and tear, obsolescence, or age. The cost of the asset represents the initial value or the purchase price of the asset. The estimated salvage value is the expected value that the asset will have at the end of its useful life after it has been fully depreciated.
According to generally accepted accounting principles (GAAP), the depreciation recorded over an asset's life should not exceed its original cost minus the estimated salvage value because this would indicate that the cost of acquiring the asset has been fully recovered. In other words, the depreciation expense should correspond to the actual wear and use of the asset over time, up to the point where it is theoretically valued at its salvage price. Throughout an asset's useful life, all depreciation methods employed (straight-line, declining balance, etc.) should adhere to this principle. Once the cumulative depreciation equals the cost minus the estimated salvage value, no further depreciation expense is recorded for that asset.