Funeral Arts National Board Practice Exam

On which asset can depreciation be claimed?

1. Health insurance

2. Real estate

3. Vehicles

4. Office supplies

The correct answer is: Vehicles

Depreciation is an accounting method used to allocate the cost of tangible assets over their useful lives. It reflects the wear and tear, decline in value, or obsolescence of an asset. Among the options presented, vehicles qualify as assets for which depreciation can be claimed. Vehicles have a defined useful life and can lose value over time due to factors such as age, mileage, and condition. Businesses that own vehicles can claim depreciation on them, which reduces taxable income, thus providing a tax benefit. The IRS allows for various methods of depreciation for vehicles, such as straight-line depreciation or accelerated methods like the Modified Accelerated Cost Recovery System (MACRS). In contrast, health insurance is considered an expense rather than an asset, and thus does not qualify for depreciation. Real estate can be depreciated, but it is not the best fit within this specific context as the question asks for the most direct answer among the four options. Office supplies are generally regarded as current assets and are typically expensed in the year they are purchased, rather than being depreciated over time. Thus, vehicles stand out clearly as capital assets eligible for depreciation, making this the correct choice in this context.