TABLE 12.5 Depreciation and Present Worth for DDB-to-SL Switching, Example 12.4 Present DDB Model SL Model Larger (P/F,15%,f) Worth of DSL. Year DDDB BV, D; Factor $100,000 - $40,000 $ 40,000 $20,000 15,000 1 60,000 0.8696 $34,784 2 24,000 36,000 24,000 0.7561 18,146 3 14,400 21,600 12,000 14,400 0.6575 9,468 4* 8,640 12,960 10,800 10,800 0.5718 6,175 5 5,184 7,776 10,800 0.4972 5,370 Totals $92,224 $100,000 $73,943 *Indicates year of switch from DDB to SL depreciation.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Hemisphere Bank purchased a $100,000 online document imaging system with a
year to determine the PWD values. (MACRS is not involved in this example.)
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