How does inventory valuation affect the calculation of depreciation?
Practice Questions
1 question
Q1
How does inventory valuation affect the calculation of depreciation?
It does not affect depreciation calculations
It increases the depreciation expense
It decreases the depreciation expense
It affects the residual value of the asset
Inventory valuation does not directly affect the calculation of depreciation, as they are separate accounting processes.
Questions & Step-by-step Solutions
1 item
Q
Q: How does inventory valuation affect the calculation of depreciation?
Solution: Inventory valuation does not directly affect the calculation of depreciation, as they are separate accounting processes.
Steps: 5
Step 1: Understand what inventory valuation is. It is the method used to determine the value of the goods a company has in stock.
Step 2: Understand what depreciation is. It is the process of allocating the cost of a tangible asset over its useful life.
Step 3: Recognize that inventory and depreciation are related to different types of assets. Inventory is for goods for sale, while depreciation is for long-term assets like machinery or buildings.
Step 4: Realize that the methods used for inventory valuation (like FIFO or LIFO) do not impact how depreciation is calculated for fixed assets.
Step 5: Conclude that since inventory and depreciation are separate processes, changes in inventory valuation do not directly affect depreciation calculations.
