Depreciation basics

Why do we depreciate assets?

• They decline in value over time!

• They become obsolete over time!

• Wear and tear makes them less valuable!

• All of the Above!

What are the two methods of depreciation we discussed in class? (select 2 answers)

• Straight Line

• Reducing increasing balance

• Double declining balance

• Years of Service deductions

What is one advantage of the double declining balance method?

• Most of the depreciation happens later in the asset's life

• Depreciation is consistent

• More of the depreciation happens early in the asset's life

• It eliminates all depreciation.

What is one advantage of the straight line method?

• Most of the depreciation happens later in the asset's life

• Depreciation is consistent

• More of the depreciation happens early in the asset's life

• It eliminates all depreciation.

Jo-Jo purchases a new machine for her business on January 1 of the current year. The cost is $8,700 and the residual value is $700. She estimates the useful life will be 5 years.

Using the straight line method, what will her first year depreciation be?

• $8,000

• $1,740

• $1,600

• $3,200

Jo-Jo purchases a new machine for her business on January 1 of the current year. The cost is $8,700 and the residual value is $700. She estimates the useful life will be 5 years.

Using the double declining balance method, what will her first year depreciation be?

• $8,000

• $1,740

• $1,600

• $3,200

Jo-Jo purchases a new machine for her business on January 1 of the current year. The cost is $8,700 and the residual value is $700. She estimates the useful life will be 5 years.

Using the straight line method, what will her second year depreciation be?

• $8,000

• $1,740

• $1,600

• $3,200

Jo-Jo purchases a new machine for her business on January 1 of the current year. The cost is $8,700 and the residual value is $700. She estimates the useful life will be 5 years.

Using the double declining balance method, what will her second year depreciation be?

• $4,800

• $1,920

• $960

• $3,200

Widgets-R-Us buys a widget making machine for $500,000 with a residual value of $50,000. The useful life of the machine is estimated to be 15 years.

Using the straight line method, what is the depreciation in the 3rd year?

• $450,000

• $30,000

• $60,000

• $90,000

Widgets-R-Us buys a widget making machine for $500,000 with a residual value of $50,000. The useful life of the machine is estimated to be 15 years.

Using the double declining value method, what is the depreciation in the 2nd year?

• $270,000

• $30,000

• $36,000

• $72,000