18. Depreciation Accounting

Try these first

1. 1.

   What is depreciation?

   Hint

   Think about how expenses are accounted for over time.

2. 2.

   Name one cause of depreciation.

   Hint

   Consider factors that reduce asset value.

3. 3.

   What does depreciation help match in accounting?

   • Assets and Liabilities
   • Expenses and Revenue
   • Costs and Profits

   Hint

   Consider how accounting reflects economic reality.

4. 4.

   True or False: Depreciation is a cash expense.

   • True
   • False

   Hint

   Think about cash flow versus accounting records.

5. 5.

   A company buys a delivery truck for $40,000. The estimated residual value is$4,000, and the useful life is 8 years. Using the Straight Line Method, calculate annual depreciation and the book value at the end of year 4.

   Hint

   Break down the problem step by step.

6. 6.

   Discuss the implications of changing a depreciation method from Straight Line to WDV for a company that has highlighted lower profits due to depreciation. What factors could justify this change?

   Hint

   Think about financial strategies and regulatory influences.