Chapter 9, Problem 9.4EX

(A)

To determine

Depreciation: It refers to the reduction in the monetary value of fixed tangible assets over its useful life due to its wear and tear or, obsolescence. In other words, it is the method of distributing the cost of tangible fixed assets over its estimated useful life.

To explain: whether the reported amount of equipment means that the replacement cost of the equipment is $44,500,000.

(B)

To determine

To explain: whether the reported amount of accumulated depreciation $29,800,000 means that it is set aside in a special fund for the replacement of the equipment.