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Obsolescence of a depreciable asset may be caused by
I. Technological changes.
II. Improvement in production method.
III. Change in market demand for the product or service output.
IV. Legal or other restrictions.
- a)Only (I) above
- b)Both (I) and (II) above
- c)All (I), (II), (III) and (IV) above
- d)Only (IV) above
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Obsolescence of a depreciable asset may be caused byI. Technological c...
Obsolescence of a depreciable asset may be caused by:
- Technological changes (I): When new technology replaces the current one, the older technology or asset becomes obsolete. For example, a machine might no longer be efficient if a more advanced version is introduced.
- Improvement in production method (II): When more efficient production methods are developed, older machines or assets used in the previous methods may become obsolete because they no longer provide the best output or efficiency.
- Change in market demand for the product or service output (III): If there is no longer a demand for the product that the machine produces, the machine may become obsolete even if it still functions properly. This could be due to changes in customer preferences or the emergence of new alternatives.
- Legal or other restrictions (IV): If new regulations or laws are introduced that restrict the use of certain types of equipment or processes, the asset might become obsolete as it can no longer be used legally.
All four factors (technological changes, improvements in production methods, changes in market demand, and legal restrictions) can cause obsolescence of a depreciable asset. Therefore, the correct answer is: C: All (I), (II), (III), and (IV) above.
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Obsolescence of a depreciable asset may be caused byI. Technological c...
Obsolescence of a depreciable asset refers to the decrease in the utility or value of an asset due to various factors. The factors that may cause obsolescence of a depreciable asset are:
I. Technological changes: Technological changes can make an asset obsolete, as newer and more advanced technology may be available that makes the existing asset less efficient or outdated.
II. Improvement in production method: Improvement in production method can make an asset obsolete, as newer and more efficient methods may be available that make the existing asset less efficient or outdated.
III. Change in market demand for the product or service output: Change in market demand for the product or service output can make an asset obsolete, as the demand for the product or service may decrease, making the existing asset less useful or valuable.
IV. Legal or other restrictions: Legal or other restrictions can make an asset obsolete, as the asset may no longer be allowed to be used or may require costly modifications to comply with new regulations.
Therefore, all the options (I), (II), (III), and (IV) can cause obsolescence of a depreciable asset. Hence, the correct answer is option (C) - All (I), (II), (III), and (IV) above.
I. Technological changes: Technological changes can make an asset obsolete, as newer and more advanced technology may be available that makes the existing asset less efficient or outdated.
II. Improvement in production method: Improvement in production method can make an asset obsolete, as newer and more efficient methods may be available that make the existing asset less efficient or outdated.
III. Change in market demand for the product or service output: Change in market demand for the product or service output can make an asset obsolete, as the demand for the product or service may decrease, making the existing asset less useful or valuable.
IV. Legal or other restrictions: Legal or other restrictions can make an asset obsolete, as the asset may no longer be allowed to be used or may require costly modifications to comply with new regulations.
Therefore, all the options (I), (II), (III), and (IV) can cause obsolescence of a depreciable asset. Hence, the correct answer is option (C) - All (I), (II), (III), and (IV) above.
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Obsolescence of a depreciable asset may be caused byI. Technological c...
Obsolescence means 'out of date', due to above reasons the assets may obsolete.
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