A. Under what conditions is the use of an accelerated depreciation method most appropriate? B. Why is an accelerated depreciation method often used for income tax purposes?

Q: Expert Answer

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 accelerated depreciation method is the most appropriate to use. Explanation When a company’s fixed assets generates more amount revenue in its initial periods of use than i... B. To determine To explain: the reason for often using the accelerated depreciation method for income tax purposes.

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Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

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BuyFind

Corporate Financial Accounting

14th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781305653535

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Answer 3

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Answer 4

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Answer 5

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 accelerated depreciation method is the most appropriate to use.

Explanation of Solution

When a company’s fixed assets generates more amount revenue in its initial periods of use than i...

Answer 6

B.

To determine

To explain: the reason for often using the accelerated depreciation method for income tax purposes.

A. Under what conditions is the use of an accelerated depreciation method most appropriate? B. Why is an accelerated depreciation method often used for income tax purposes?

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Corporate Financial Accounting

A. Under what conditions is the use of an accelerated depreciation method most appropriate?

B. Why is an accelerated depreciation method often used for income tax purposes?

Explanation of Solution

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