Question

The term ____________ is used to indicate the process of allocating a prepaid expense to accounting periods during which there are benefits realised from the depreciable equipment.

(a) Cost Depreciation

(b) Investment charges

(c) Maintenance and repairs

(d) Operation cost

The question was asked during an online interview.

My query is from Operating Cost of Equipment topic in section Construction Equipments of Construction & Building Materials

Answer 1

Correct option is (a) Cost Depreciation

To elaborate: The methods employed to determine the cost depreciation are arbitrary and they have to be arbitrary because it is not possible to carry out tests, either theoretically or practically, to work out the rate of consumption of the economic productive usefulness of depreciable equipment.