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Your friend Tom Smith has decided to expand Smith Sales Company. He has acquired an expansion...

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Accounting

Your friend Tom Smith has decided to expand Smith Sales Company.He has acquired an expansion loan and purchased $500,000 of plantassets as part of the expansion. Tom values your advice andrequests your help in properly depreciating the plant assets. Tomhas paid you well for your advice and you readily accept thechallenge.

Explain the different methods that can be used to calculatedepreciation including: Straight-line, Double declining balance,Units of production & Sum of years digits.

Answer & Explanation Solved by verified expert
3.8 Ratings (601 Votes)
Tom Smith can provide depreciation on the following methods 1 Straightline Method Straight line depreciation is the default method used to recognize the carrying amount of a fixed asset evenly over its useful life It is employed when there is no particular pattern to the manner in which an asset is to be utilized over time The formula is as given below Annual Depreciation Cost of the asset Scrap value at the end Useful life Use of this method is highly recommended as it is the easiest of all the methods to calculate depreciation ie only a few calculation errors 3 Double Declining Balance Method The double declining balance method of depreciation is also known as the 200 declining balance method of depreciation It is a form of accelerated    See Answer
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