Under the straight-line method, when does depreciation of a newly purchased machine normally begin?
Correct answer: B. When the machine is available for use
- A. When the purchase order is approved
- B. When the machine is available for use
- C. When the first product is sold
- D. When the supplier receives payment
Explanation
Depreciation begins when the asset is in the location and condition necessary for its intended operation. Purchase, payment, or the first sale does not determine when the asset is ready for use.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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