Question

Explain the circumstances under which different methods of depreciation can be employed

Answer 1

Consider how each of these can be used, depending on the situation. Straight-line depreciation is the simplest method of depreciation. It assumes the expense is the same for every year the asset is in use. The formula for the straight-line depreciation is: Depreciation Expense = (Cost - Salvage Value) / Useful Life

Answer 2

The circumstances under which different methods of depreciation can be employed.

• Depreciation is what causes a company's assets to lose value over time.
• Straight-line, declining balance, sum of the years' digits, and units of production are the four depreciation techniques.
• Different techniques can be employed in a business to depreciate assets. Employing two or more depreciation methods is permissible and standard practise for businesses.
• Different depreciation techniques may be used, depending on the type of business, to calculate the assets' current value. Depreciating equipment sooner in its usage, evenly over time, or closer to the conclusion of its anticipated use may be more advantageous.
• These five techniques are used by businesses to calculate asset depreciation: straight line, decreasing balance, double-declining balance, units of production, and sum-of-years digits.
• The systematic process by which the cost of a tangible asset is expensed out to the income statement is known as the depreciation technique. The straight-line approach, decreasing balance method, units of production method, and sum of year digits method are all common depreciation techniques. MACRS is the appropriate depreciation technique for tax purposes.

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