CFA Practice Question

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CFA Practice Question

True or False?

When a plant asset is being discarded or sold, it is necessary to update the accumulated depreciation and book value on the date of sale.
Correct Answer: True

Depreciation is the allocation of the cost of an asset over its service life to the business. Failure to update the depreciation will result in an understatement of gain or an overstatement of loss on the sale of the asset.

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