How many estimates are used in the calculation of depreciation?

Question

Christine Snow

Physics

1 January, 13:28

How many estimates are used in the calculation of depreciation?

+4

Answers (2)

Know the Answer?

Winston Bauer · Answer 1

Two estimates

Explanation:

There are mainly two estimates used in the calculation of depreciation such as the useful life and the salvage value of an asset. The salvage value is defined as the predicted amount that will be obtained by a company from an asset when it is disposed at the end of the useful life of the particular asset. On the other hand, the useful life commonly refers to the estimation of how long the asset is useful for the company. This is different from the lifespan of the asset.

William Cooley · Answer 2

Answer: The correct answer is : There are several methods to calculate depreciation, such as: straight line, activity or units produced, sum of annual digits and double share on the decreasing value.

Explanation: The most commonly used methods are, the linear method, where the original cost of an asset is divided by its estimated useful life to find the amount to be amortized each year and also the accelerated depreciation method is used in which more depreciation is provided the first years of useful life of the asset and for the remaining years a lower depreciation is assigned. This method in turn can be: doubly decreasing balance (200%), 150% decreasing balance, 125% decreasing balance and digits of the sum of the years.