Skip to content
Solved Assignments

ACC 230 WEEK 2: Differentiating Depreciation Methods: Straight-Line vs. Accelerated Depreciation

Comparison of straight-line and accelerated depreciation methods in accounting.

Preview 2 of 2 pages

See the first 2 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    ACC 230 WEEK 2: Differentiating Depreciation Methods: Straight - Line vs. Accelerated Depreciation ACC 230 WEEK 2 CheckPoint: Differentiating Depreciation Methods · Resource: Ch. 2 of Understanding Financial Statements · Due Date: Day 4 [Individual forum] · Compose a 200 - to 300 - word response to question 2.4 on p. 74 (Ch. 2). In addition, include a summary of the advantages and disadvantages of using different depreciation methods (straight - line versus accelerated). Discuss and differentiate straight line method of depreciation and accelerated method. Depreciable assets lose value with time because of wear and tear, aging and obsolescence.This loss in value of tangible assets with time is called depreciation. Straight line depreciation method is most commonly used. In this method,charges are spread evenly over the useful life of the asset.Depreciation charged every year in this method is constant. This allows for more income smoothing where income has gradual change over useful life of the asset without dips and highs. Accelerated method of depreciation assumes that an asset is used heavily during the early years of its useful life and loses most of its value during first few years of use.In this method, in early years there will be heavy depreciation. Depreciation decreases with time and by the end of useful life of the asset, depreciation becomes zero. So, this method lacks constant expense over time. However,since depreciation is deducted from income for tax report ing,accelerated method allows larger tax deduction in early years that improves profit. Although straight line method will also provide same amount of tax deduction in later years, because of time value of money, tax saving in early years is better for the company. Why do companies use different depreciation methods for tax reporting and financial reporting? For financial reporting purpose, Straight line method is used because it resembles the benefit derived from the asset and actual loss in value of th e asset with time.Since straight line method charges less depreciation as compared to accelerated method in early years, book value of the asset remains higher

  2. Page 2

More Accounting study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.