4.1 - When to Switch Between Methods
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Practice Questions
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What is depreciation?
💡 Hint: Think about how wear and tear affects equipment.
What is salvage value?
💡 Hint: Consider what an asset might sell for after it’s been used.
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Interactive Quizzes
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What is the main reason companies might switch depreciation methods?
💡 Hint: Think about the risks of depreciation strategies.
True or False: The Straight-Line method always provides higher annual depreciation than the DDB method.
💡 Hint: Consider what happens to depreciation over time.
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Challenge Problems
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An asset costs ₹10,000, has a salvage value of ₹2,000, and is expected to last 5 years. Determine the first year's depreciation using both DDB and Straight-Line methods and decide which to use.
💡 Hint: Calculate both methods and compare them.
If an asset initially worth ₹50,000 depreciates at DDB, and its book value reaches ₹25,000, but the salvage value is ₹30,000, explain the implications.
💡 Hint: Think about the need to maintain the salvage value in financial reports.
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