3. Comparison of Depreciation Methods

Try these first

1. 1.

   What does SYD stand for in depreciation?

   Hint

   Think about the components considered in depreciation over time.

2. 2.

   True or False: The Double Declining Balance method considers salvage value in its calculation.

   Hint

   Remember how DDB is calculated.

3. 3.

   What is the primary goal of using depreciation methods like DDB?

   • To enhance cash flow
   • To reduce asset value
   • To maintain accurate accounting

   Hint

   Think about how depreciation affects taxes.

4. 4.

   True or False: The total depreciation using SYD will differ compared to straight-line methods when calculated over the same lifespan.

   • True
   • False

   Hint

   Recall the principle that all methods end up accounting for the same total cost.

5. 5.

   Calculate the depreciation for a machine costing ₹ 1,500,000 over 5 years using the SYD method and provide a year-by-year breakdown.

   Hint

   Start with total years and decrease dependency on n sequentially.

6. 6.

   Given a machine with an initial cost of ₹ 1,000,000, salvage value of ₹ 200,000, and a useful life of 8 years, discuss making a switch from DDB to Straight Line in year 6 if DDB depreciation falls below the Straight Line method.

   Hint

   Analyze year 6 depreciation from both perspectives to justify the switch.