The term depreciation refers to how the value of an asset (such as a car) decreases over time. There are several different approaches for calculating depreciation. Part A: In the straight-line method of calculating depreciation, the value of the item is reduced by the same amount each year. Suppose a company purchases a car for $24000. Using straight-line depreciation, the value of the car may be reduced by $2500 each year. Determine a formula for S(t), the value of the car t years after purchase. Answer: Part B: After five years, the value of the car, using the straight-line method, will be $ Part C: After twelve years, the value of the car, using the straight-line method, will be $ Part D: In the declining balance method of depreciation, the value of the item is reduced by the same percentage each year. Suppose the $24000 car is depreciated at a rate of 14% each year. Determine a formula for D(t), the value of the car t years after purchase. Answer: Part E: After five years, the value of the car, using the declining balance method, will be $ (Round to the nearest dollar) Part F: After twelve years, the value of the car, using the declining balance method, will be $ (Round to the nearest dollar) Part G: For tax purposes, the company may want to deduct the car's depreciation. However, only one method of depreciation can be used for a given asset. Which depreciation method should a company use for the $24000 car in order to maximize the deduction: the straight-line method or the declining balance method? Keep in mind that a company can increase their deduction for an asset if the asset has depreciated more in value. That is, a smaller value for the asset means a larger deduction for the company.
The term depreciation refers to how the value of an asset (such as a car) decreases over time. There are several different approaches for calculating depreciation. Part A: In the straight-line method of calculating depreciation, the value of the item is reduced by the same amount each year. Suppose a company purchases a car for $24000. Using straight-line depreciation, the value of the car may be reduced by $2500 each year. Determine a formula for S(t), the value of the car t years after purchase. Answer: Part B: After five years, the value of the car, using the straight-line method, will be $ Part C: After twelve years, the value of the car, using the straight-line method, will be $ Part D: In the declining balance method of depreciation, the value of the item is reduced by the same percentage each year. Suppose the $24000 car is depreciated at a rate of 14% each year. Determine a formula for D(t), the value of the car t years after purchase. Answer: Part E: After five years, the value of the car, using the declining balance method, will be $ (Round to the nearest dollar) Part F: After twelve years, the value of the car, using the declining balance method, will be $ (Round to the nearest dollar) Part G: For tax purposes, the company may want to deduct the car's depreciation. However, only one method of depreciation can be used for a given asset. Which depreciation method should a company use for the $24000 car in order to maximize the deduction: the straight-line method or the declining balance method? Keep in mind that a company can increase their deduction for an asset if the asset has depreciated more in value. That is, a smaller value for the asset means a larger deduction for the company.
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:The term depreciation refers to how the value of an asset (such as a car) decreases
over time. There are several different approaches for calculating depreciation.
Part A: In the straight-line method of calculating depreciation, the value of the item is
reduced by the same amount each year. Suppose a company purchases a car for
$24000. Using straight-line depreciation, the value of the car may be reduced by
$2500 each year. Determine a formula for S(t), the value of the car t years after
purchase.
Answer:
Part B: After five years, the value of the car, using the straight-line method, will be $
Part C: After twelve years, the value of the car, using the straight-line method, will be
Part D: In the declining balance method of depreciation, the value of the item is
reduced by the same percentage each year. Suppose the $24000 car is depreciated
at a rate of 14% each year. Determine a formula for D(t), the value of the car t years
after purchase.
Answer:
Part E: After five years, the value of the car, using the declining balance method, will
be $
(Round to the nearest dollar)
Part F: After twelve years, the value of the car, using the declining balance method,
will be $
(Round to the nearest dollar)
Part G: For tax purposes, the company may want to deduct the car's depreciation.
However, only one method of depreciation can be used for a given asset. Which
depreciation method should a company use for the $24000 car in order to maximize
the deduction: the straight-line method or the declining balance method? Keep in
mind that a company can increase their deduction for an asset if the asset has
depreciated more in value. That is, a smaller value for the asset means a larger
deduction for the company.
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Step 1: Define Depreciation
VIEWStep 2: Determine a formula for the value of the car after t years of purchase using straight line method.
VIEWStep 3: Determine the value of car after 5 years using the straight line method
VIEWStep 4: Compute the value of car after 12 years using the straight line method
VIEWStep 5: Determine a formula for the value of the car after t years of purchase using double declining method
VIEWStep 6: Determine the value of car after 5 years using the double-declining method
VIEWStep 7: Determine the value of car after 12 years using the double-declining method
VIEWStep 8: Determine the depreciation method to use in order to gain maximum deduction
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