Depreciation

Feb 3rd, 2012
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Depreciation A variety of depreciation methods are used to allocate the cost of an asset to all of the accounting periods benefited by the use of the asset. Your client has just purchased a piece of equipment for \$100,000. Explain the concept of depreciation. Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?

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DepreciationNameInstitutionDateDepreciationDepreciation means the process of allocating the cost of equipment, machinery and other plant assets over their useful life. The useful life of an asset is the estimate productive life of the asset. The salvage value is the value that the organization expects to get after selling or exchanging an asset after its useful life. Depreciable cost is the total cost of the asset minus the expected salvage value of the asset. Net book value is the total cost of the asset minus its accumulated depreciation assigned to it. There are different depreciation methods. The straight-line depreciation will allocate the cost of an asset over its useful life in even manner. The annual depreciation expense of the asset is calculated by dividing the depreciable cost of the asset by the number of years in the useful life of the asset (Beaver & Dukes, 1974).Annual Depreciation Expense = (Depreciable cost)/ (Useful life in years)The straight-line rate is one divided by the number of years in service life of the asset.1/ (Useful life in years) = Straight-line rateThe double-declining balance depreciates two times the straight-line rate ea

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