Ron Zander just slept through the class in which Professor Chen explained the concept of depreciation. Because the next test is scheduled for Friday, Zander telephones Sven Svensen to get his notes from the lecture. Svensen’s notes are concise: “Depreciation—Sounds like Greek to me.” Zander next tries Lisa Lake, who says she thinks depreciation is what happens when an asset wears out. Jason Gerbing is confident that depreciation is the process of creating a cash fund to replace an asset at the end of its useful life.
Requirement
1. Explain the concept of depreciation for Zander. Evaluate the explanations of Lake and Gerbing. Be specific.