ACCT205 Week 3 Discussions and Responses.docx

100000 costs5 years 20000 per year depreciation

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$100,000 (costs)/5 (years) = $20,000 (per year depreciation allocated) or you could say $100,000 ($20,000 per year x 5 years). Considering this I would say that the Straight line method would be most advantageous because the depreciation is allocated evenly over the useful life of the product. It is also the most convenient, and simplest method to use (if this is not a huge company that sells products in large quantities). Double-declining balance (DDB), with maintenance charges rising it is offset by reducing the depreciation. “Because net book value is decreasing, so is the annual depreciation charge.” Wainwright, (Ed.). (2012). It “front loads” the depreciation during the assets service life earlier. Units-of-Output, is very similar to straight line, however, it allocates units based on usage as opposed to units of time as the straight line method uses. Wainwright, S. K. (Ed.). (2012). Principles of Accounting: Volume I [Electronic version]. Retrieved from (Links to an external site.) Discussion 2 Response 1 Let at least two of your peers know if a company would use an accelerated depreciation method for their financial statements or their tax returns. Why do you believe this would be the case? Rebecca Wrote The double declining balance method of depreciation involves doubling the cost at the beginning of the depreciation process to allow for maintenance expense as the asset ages. For the purchase of the equipment in this example, I would use either the straight-line method or the double declining balance method. I feel that without an exact description of what this piece of equipment is it would be difficult to understand any possible upkeep and maintenance expenses that would be required. If there is little to no long term wear and tear I would suggest using the straight-line method and allocated the cost equally over the life of the asset. My Response Hi Rebecca, I enjoyed reading your post! You are right, not knowing what type of equipment being purchased, using either the straight line or the double declining balance, would and could benefit the company. I think all equipment depreciates at some point caused by wear and tear, so it would be hard to make solid decision on which method to use due to lack of information on the type of equipment. I chose to use the straight-line method because you can spread the allocated cost over the entire life span of the equipment equally for each period. However, an accelerated depreciation is a method of depreciation where the asset loses the book value a lot faster as it allows a larger deduction early on and minimizes taxable income. I think most companies would use the accelerated depreciation method as a benefit, because it brings a reduction in taxes. “The
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