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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Under U.S. GAAP, in a year in which the fair value of an asset rises, should a company record depreciation expense for that asset? Why?

To determine

Describe whether the company should record the depreciation expense for the assets that arises from the fair value under U. S.GAAP and explain the reason behind it.

Explanation

Depreciation expense:

Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.

The depreciation is a cost allocation method and it does not intend to produce a book value of an asset that equals its fair value...

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