18.5. Methods of Depreciation

Try these first

1. 1.

   Identify the Straight Line Method formula.

   Hint

   What is the effect of the residual value?

2. 2.

   What is the key feature of the WDV method?

   Hint

   Think about how it changes over time.

3. 3.

   What is the formula for Straight Line Method?

   • (Cost - Residual) / Useful Life
   • (Cost + Residual) / Useful Life
   • (Cost x Residual) / Useful Life

   Hint

   Which method evenly distributes depreciation?

4. 4.

   Does WDV method lead to higher depreciation in earlier years?

   • True
   • False

   Hint

   Consider how asset efficiency changes over time.

5. 5.

   Calculate the depreciation for a machine that costs $150,000, with a residual value of$25,000 and a useful life of 15 years, using all four methods.

   Hint

   Calculate each step methodically for better accuracy.

6. 6.

   A company plans to use an asset for 8 years, costing $80,000 with a$10,000 residual value. Calculate depreciation using SLM, WDV, and Units of Production if used for 12,000 units in that year.

   Hint

   Keep in mind to check unit production for accuracy quotients.