2.1. Depreciation Calculation for Year 1

Try these first

1. 1.

   What does the sum of the years' digits method emphasize?

   Hint

   Think about how depreciation is calculated.

2. 2.

   Calculate the Year 1 depreciation using the double declining balance method for an asset with a book value of ₹7,600,000.

   Hint

   Remember to apply 2/n, where n is the remaining useful life.

3. 3.

   Using SYD, Year 1 depreciation for an asset costing ₹8,200,000 is?

   • ₹1,280,000
   • ₹1,688,888
   • ₹12,800,000

   Hint

   Recall the formula used in SYD calculations.

4. 4.

   True or False: The double declining balance method considers salvage value when estimating depreciation.

   • True
   • False

   Hint

   Consider how DDB operates compared to SYD.

5. 5.

   An asset purchased for ₹50,000 has a salvage value of ₹5,000 and a recovery period of 5 years. Calculate Year 1 depreciation using both methods and discuss which option provides greater benefit.

   Hint

   Calculate both and compare the deductions.

6. 6.

   Explain why an accountant might switch from SYD to straight-line in the later years.

   Hint

   Consider financial strategies and reporting impacts.