What does accumulated depreciation indicate about an asset?

What does accumulated depreciation indicate about an asset?

• A. Total depreciation charged to date
• B. Current replacement cost
• C. Future salvage value
• D. Market value today

Answer: (A)

Accumulated depreciation shows the total depreciation expense that has been recorded against an asset since it started being used. It’s a contra-asset account, so it reduces the asset’s carrying value on the balance sheet. The book value of the asset equals its original cost minus accumulated depreciation. For example, if an asset cost 50,000 and has 12,000 accumulated depreciation, its carrying amount is 38,000. This figure is not the amount you’d get if you sold the asset today (market value), nor the cost to replace it today (current replacement cost), nor the amount you expect to salvage at the end of its life (future salvage value).

Accumulated depreciation shows the total depreciation expense that has been recorded against an asset since it started being used. It’s a contra-asset account, so it reduces the asset’s carrying value on the balance sheet. The book value of the asset equals its original cost minus accumulated depreciation. For example, if an asset cost 50,000 and has 12,000 accumulated depreciation, its carrying amount is 38,000. This figure is not the amount you’d get if you sold the asset today (market value), nor the cost to replace it today (current replacement cost), nor the amount you expect to salvage at the end of its life (future salvage value).