Question

1. List the order in which cost recovery techniques are considered in the year a depreciable asset is placed in service.

Considered first:

Considered second:

Considered third:

Answer 1

The order in which cost recovery techniques are considered in the year a depreciable asset is placed in service is listed as follows:

Considered first:

DEPRECIATION: It is allowed for tangible assets that are used in business and have a useful life greater than a year.

Considered second:

AMORTIZATION: It is allowed for claiming deduction on intangible assets used for business.

Considered third:

DEPLETION: It is the allowed deduction for extracting natural resources and is used to deduct the cost of resources as they are used up.