Chapter 10, Problem 22Q

To determine

Depreciation: Depreciation refers to a method of accounting under which the value of a fixed asset is written off during the life of that asset.

Straight Line Method: Under the straight line method, the value of the asset left after deduction of the salvage value is depreciated by same amount throughout the life of the asset.

Accelerated Method: Under the accelerated method, the value of the asset is depreciated with a higher amount in the initial years of life of the asset in order to minimize the tax payable on income.

Internal Revenue Service (IRS): Internal revenue service refers to the tax collection agency of the United States, to which the tax on income is payable by a person.

To Explain: Whether different methods of depreciation can be used for financial reporting purpose and tax purpose.