3.2. Book Value Comparison

Try these first

1. 1.

   What is the formula for calculating depreciation using the Sum of the Years' Digits method?

   Hint

   Think about the role of remaining years and initial costs.

2. 2.

   Define the Double Declining Balance method in simple terms.

   Hint

   Focus on speed of depreciation.

3. 3.

   What does SYD stand for?

   • Standard Yearly Depreciation
   • Sum of the Years' Digits
   • Single Year Depreciation

   Hint

   Think about how years contribute to depreciation.

4. 4.

   True or False: Double Declining Balance considers salvage value in its initial calculations.

   • True
   • False

   Hint

   Recall how DDB operates.

5. 5.

   A machinery costing ₹5,000,000 with a salvage value of ₹200,000 has a useful life of 10 years. Calculate the first and second-year depreciation using both SYD and DDB methods.

   Hint

   Remember to account for annual depreciation reductions.

6. 6.

   A business needs to switch from DDB to SYD in year 8 due to declining fiscal performance expected to lead to lower asset valuations. How to ensure book value aligns with salvage at year end?

   Hint

   Check values stepwise to avoid depreciation pitfalls.