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The underlying principle of depreciation is that profits would be overstated if no allowance were made for the replacement of the asset. Therefore, periodic depreciation

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The underlying principle of depreciation is that profits would be overstated if no allowance were made for the replacement of the asset. Therefore, periodic depreciation expense segregates a portion of earnings for reinvestment, \"protecting\" that sum from being disuibuted as dividends and taxes. Should this be interpreted to mean that money equivalent to the periodic depreciation expense is set aside and earmarked for investment in replacement assets

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