What are the differences among valuation, depreciation, amortization, and depletion? Which depreciation method provides you with the highest depreciation expense in the first year? Explain why. When might a company want the highest depreciation expenses possible? When might a company want the lowest depreciation expenses possible?Valuation is a process by which the potential market value of an entity, through its assests or liabilities, is estimated.Depreciation is the practice of allocating the cost of assets to a number of years.Amortization is the process of allocating to expense the cost of an intangible asset.Depletion An accounting term describing the amortization of assetsthat can be physically reduced.The depreciation method that provides you with the highest depreciation expense in the first year is the Declining-Balance. It results in more depreciation in the early years of an asset’s life than does the straight-line approach. A company might want the highest depreciation expenses possible because than they can get a newer and improved product earlier rather than later.
This is the end of the preview.
access the rest of the document.