ACC 205 Week 3 Discussion 2 - Depreciation is the process...

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Depreciation is the process used to show how the purchase of an asset is transferred from a cost to an expense over time. Important factors that help determine the depreciation of an asset are things such as the cost of the asset as well as the service life (Wainwright, 2012, 6.2). When the company purchases the piece of equipment for $100,000 other factors than just the buying price must be incorporated as well. How expensive is the equipment to maintenance? What is the shelf life of the equipment purchased? Will the purchase make enough sense that the company can earn revenue from this purchase? The depreciation of this equipment factors into all of this. For $100,000 piece of equipment, as the company accountant, I would use the Double declining balance (DDB) method. The likelihood of a piece of equipment not running as new over time is

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