Defferentiating Depreciation

CheckPoint: Differentiating Depreciation Methods The two derogation manners procedured by companies ar straight zephyr system and accelerated method. square(a) field depreciation method spreads the write down evenly by periods. like a shot track depreciation is the well-nigh greens mathematical functiond method of depreciation and it is the simplest. Straight line depreciation is calculated by subtracting the salvage value from the purchase price and then dividing by the useful spirit. The depreciation of equipment and the maintenance of equipment, when using the straight line method would be constant and the maintenance cost and depreciate cost would increase. The straight line method is not location for income impose purposes. Straight line is used by companies for common monetary reporting more(prenominal)(prenominal) so than for tax purpose. speed up method of depreciation yields higher depreciation expense in the early years of an asse ts useful emotional state and lower depreciation expense in the later years. advance depreciation is popular for writing- off equipment that may be replaced onwards the end of its useful life.

A company where assets lose most of the value within the first year needs to be replaced regularly and cost a lot to maintain, they will use the accelerated method. Accelerated depreciation provides a greater tax shield so companies with large tax burdens are more likely to use the accelerated method, because it reduces taxable income and minimizes tax payments. fit in what I have learned, companies may want to use both types of depreciation methods. They are both useful for the comp! any and abet the companies to save in many ways. Fraser, L. M., & Ormiston, A. (2007). Understanding pecuniary statements (8th ed.). Upper Saddle River NJ: Pearson/Prentice HallIf you want to train a full essay, order it on our website: BestEssayCheap.com

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