MGT 11A Chapter Notes - Chapter 8: Ddb Worldwide, Macrs, Financial Statement
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Straight-line method: charge the same amount to each period of the. Asset book value: asset"s total cost - accumulated depreciation. Ex: ,000 - (2 yrs x ,800) = book value. 100% divided by the number of periods in the asset"s useful life. Units-of-production method: charge a varying amount for each period depending on asset"s usage. Better used for when equipment use varies from period to period. Declining-balance method: uses a depreciation rate that is a multiple of the straight-line rate. Accelerated depreciation method: method that produces larger depreciation charges in the early years of an asset"s life and smaller charged in its later years. Double-declining balance (ddb): common depreciation rate is double the straight-line rate. Many companies use accelerated depreciation in computing taxable income. Reporting higher depreciation expense in the early years of an asset"s life reduced the company"s taxable income in those years and increases it in later years. Goal is to postpone its tax payments.
