Question

The adjusted basis of an asset is: Multiple Choice The cost basis less any accumulated depreciation. The cost of the asset. The fair market value of the asset. The trade-in value of the asset.

Answer 1

Answer: The cost basis less any accumulated depreciation

Explanation: the adjusted basis of an asset is the cost less any accumulated depreciation. For example, a firm purchase an asset for $100,000. If has a 10 year useful life depreciated using the straight line method. So, the yearly depreciation is $10,000 per year. After 5 years, the adjusted basis of the asset would be $50,000 [100,000 - (5 x 10,000)].