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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

a. Under what conditions is the use of the straight-line depreciation method most appropriate?

b. Under what conditions is the use of the units-of-activity depreciation method most appropriate?

c. Under what conditions is the use of the double-declining-balance depreciation method most appropriate?

a.

To determine

Methods of Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear, or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life.

The three methods of depreciation are:

  • Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.
  • Units-of-activity method: In this method of depreciation, the amount of depreciation is charged based on the units of production each year.
  • Double-declining balance method (Accelerated method): In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.

To explain: the conditions under which the straight-line depreciation method is the most appropriate to use.

Explanation

When a company’s fixed assets generates same amount of rev...

b.

To determine

To explain: the conditions under which the units-of-activity depreciation method is the most appropriate to use.

c.

To determine

To explain: the conditions under which the double-declining-balance depreciation method is the most appropriate to use.

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