For which of the following assets would a wholesale company use depreciation under the straight-line method?

• A. Cash in bank
• B. Inventory held for resale
• C. Delivery trucks
• D. Accounts receivable

Answer: (C)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. It is applied to assets that have a finite life and are used in the operations of a business.
2. Identify the type of assets that are subject to depreciation: Depreciation is typically applied to fixed assets such as buildings, machinery, equipment, and vehicles. These assets are used in the business and lose value over time due to wear and tear or obsolescence.
3. Review the assets listed in the problem: Cash in bank, inventory held for resale, delivery trucks, and accounts receivable. Determine which of these assets are fixed assets and have a finite useful life.
4. Exclude assets that are not depreciable: Cash in bank is a liquid asset and does not lose value over time. Inventory held for resale is classified as a current asset and is expensed when sold, not depreciated. Accounts receivable represent amounts owed to the company and are not subject to depreciation.
5. Conclude that delivery trucks are the correct asset for depreciation under the straight-line method: Delivery trucks are fixed assets used in the operations of the business and have a finite useful life. The straight-line method allocates the cost of the trucks evenly over their useful life.