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3 cards from this section. Quick, good the night before a test.
What is depreciation?
Think about how businesses expense their assets over time.
What does DDB stand for in depreciation?
It's a method that allows quick expensing of an asset.
What is the primary reason for switching from DDB to Straight-Line?
Think about the outcomes of each method on financial reports.
True or False: Switching depreciation methods is uncommon in accounting.
Consider industry practices in asset management.
A company purchased equipment for $50,000 with a salvage value of $5,000 and a useful life of 10 years. They initially used the DDB method, which led to a depreciation of $8,000 in the first year. How much depreciation should be reported if they switch to Straight-Line after the second year?
Calculate total depreciation first, then adjust for the years used.
If an asset with an initial cost of $100,000, salvage of $15,000, depreciates normally under DDB, but switches to Straight-Line after 4 years due to book value reaching below salvage value, compute the values at the end of 4 years and determine the necessary adjustments needed when switching methods.
Use the built data year by year to determine if switching is necessary.
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