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Please read through the types of (depreciation methods) applicable in the business world. When a business acquired "assets" tangible or intangible form, they must access which is most...

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Please read through the types of (depreciation methods) applicable in the business world.


When a business acquired "assets" tangible or intangible form, they must access which is most benefical during its current state of business.


Which of the 4 depreciation methods (see notes folder) for info, would be ideal?


(1) Moving and Storage company that purchases 1-2 trucks per year and has a life of 10Yrs until the trucks become costly due to repairs?


(2) A hospital purchases various quirpment but wants to show a business operating loss in the first 3 years of formation to obtain government/local funding?


(3) John & Jill buy an apartment complex with 40 units and plan to keep this in the family for future grandchildern?



Briefly explain your decision.


Answered Same DayMar 08, 2022

Solution

Nitish Lath answered on Mar 08 2022
29 Votes
Depreciation is a method of decreasing the value of assets over time and on account of the wear and tear of assets. In the business world, there are various types of depreciation methods adopted by the entities but there are mainly 4 types of depreciation methods used by the entities which are as below:
· Straight-line method (SLM)- The depreciation is charged equally over the useful life of assets.
· Written Down Value (WDV) method- A depreciation rate is applied as per the schedule and is known as an accelerated method of depreciation (Somer Anderson, 2021).
· Sum of the year's digit method- Annual depreciation is calculated based on fractions using the no. of years of the useful life of assets.
· Units of productions method- An equal expense rate is assigned and based on usage or units the depreciation is charged.
The depreciation remains the same in totality over the useful life of the asset but under each method, there is a timing difference to charge the depreciation and a separate method of depreciation may be adopted for each class of asset.
Based on...
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