Question

Lucky started a new business last year. Since it was the first year of operation, the business purchased $10,000 in machinery and used the straight-line method for depreciation. Business is booming, so Lucky purchased $15,000 in equipment during the current year to help meet production demands. Which of the following statements is true regarding the depreciation choices available to Lucky? The new machinery can be depreciated under the same method or a different method than the previously purchased machinery T/F

Answer 1

Answer:

True

Explanation:

The reason is that the Internation Financial Reporting Framework says that though there are choices the company must opt to the depreciation method that brings fairness to the financial statement, which means that the method used calculates the depreciation for the year that actually represents the decrease in the value of the assets in market value. So if the current method brings the fairness to the Financial statements, Lucky can use them and if those don't bring fairness to the financial statements then its better to use alternative which will bring the fairness to financial statements.