Purpose: This case examines the process of matching the cost of fixed assets with the revenues which the assets help to generate.
Plant assets provide services for two or more periods. There is a cost to the services consumed; this cost should be matched with the periods benefited.
Instructions
(a) Briefly define depreciation as used in accounting.
(b) Identify the factors that are relevant in determining the annual depreciation and explain whether these factors are determined objectively or whether they are based on judgment.