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 assets that 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
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This note was uploaded on 03/28/2011 for the course ACCT 349 taught by Professor Goyal during the Spring '09 term at University of Phoenix.