Which principle should primarily determine the depreciation method selected for a non-current asset?
Correct answer: A. The pattern in which its economic benefits are consumed
- A. The pattern in which its economic benefits are consumed
- B. The amount of cash paid for the asset
- C. The market price of the asset at year end
- D. The date on which the asset was purchased
Explanation
The depreciation method should reflect how the asset's economic benefits are consumed. Historical cost, market price, and purchase date do not by themselves determine that consumption pattern.
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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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