Why did you allocate a portion of the cost to each of the five years? What basic principle of…


Question Description:

33

Assets and depreciation—which assumption sand principle? RDP and Brothers purchased a panel truck for $25,000 on January 1, 2011. It estimated the life of the truck to be five years, and it planned to depreciate an equal amount in each of the five years. a. In line with generally accepted accounting principles, determine the amounts required here. 2011 2012 2013 2014 2015 Original cost Depreciation expense Accumulated depreciation Net book Value b. Why did you decide to initially recognize the cost as an asset rather than treat it as an expense? What basic assumption of financial accounting are you relying upon in this decision? c. Why did you allocate a portion of the cost to each of the five years? What basic principle of financial accounting measurement are you relying upon in this decision?

Answer

33