Question

Depreciation requires only two estimates—useful life and residual value—both of which are specified by GAAP depending on the asset type.

Select one:

True

False

Answer 1

False, the given statement is False, that Depreciation requires only two estimates useful life and residual value both of which are specified by GAAP depending on the asset type.

Because GAAP does not decides the useful life and residual value of the assets. The company calculates the useful life that can generate the income the organization. The usful life is decided on the basis of age of asset, frequency of use of assets and level of maintenance of asset.The residual value of an asset is also decided by the company considering the expected value that the asset can be sold at the end of the estimated life of assets.