How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Haseeb Your Own Question

Haseeb
Haseeb, Management Accountant
Category: Finance
Satisfied Customers: 47
Experience:  CMA
31762638
Type Your Finance Question Here...
Haseeb is online now
A new question is answered every 9 seconds

Can Ive the answer back by 6pm today

Resolved Question:

What are the differences among valuation, depreciation, amortization, and depletion? Is it appropriate to calculate depreciation using two different methods? Explain why or why not. Which depreciation method provides you with the highest depreciation expense in the first year? Explain why. When might a company want the highest depreciation expenses possible? When might a company want the lowest depreciation expenses possible?
Submitted: 4 years ago.
Category: Finance
Expert:  Haseeb replied 4 years ago.

Hello,

 

Thanks for your question.

 

Valuation mean the asset (investments or inventories) should be recorded and disclosed at current market price regardless of whether price is above or below cost.

 

Depreciation mean the allocation of the cost of asset (or tangible asset) to the periods in which services are received from the asset.

 

Amortization mean the systematic write-off / charged to expense of the cost of an intangible asset over the periods of its economic usefulness.

 

Depletion mean the pro rata allocation of cost of minerals or natural resources to the units removed or occurred units. It computed by dividing the cost of the natural resources by the estimated available number of units.

 

Companies are most widely use method of calculating depreciation is the Straight line method, for maintaining books of accounts and this method works as, an equal portion of the cost of an asset is allocated to each period of use. But for income tax purpose accelerated method of depreciation is used, because it provides opportunity to the businessmen to writing off as depreciation expense a large portion of the cost of a new asset during its first year. So if any company not using accelerated method of depreciation that means they are using two different methods of depreciation, one for accounting purpose and another for income tax purpose.

 

Your question is which depreciation method provides highest depreciation expense in the first year, answer is:

Accelerated method or double declining method of depreciation provides relatively large amounts of depreciation in the early years of use and correspondinly reduced amount in the later years.

 

Your question is why we use the method of depreciation which provides highest amount of depreciation, answer is

Due to increasingly pace of invention of new products is making obsolescence factor of much greater than physical deterioration.

 

When company wants highest amount of depreciation expense,

  1. To offset the increase of repair expenses when asset grow older.
  2. To recovered the cost of asset within short period of years.

When company wants lowest amount of depreciation expense,

  1. To charge the equal amount of depreciation on estimated useful life.
  2. When usage of an asset is fairly uniform from year to year.

Hope this help you.

 

 

 

Haseeb, Management Accountant
Category: Finance
Satisfied Customers: 47
Experience: CMA
Haseeb and 4 other Finance Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
< Last | Next >
  • http://ww2.justanswer.com/uploads/RA/rakhi.v/2012-7-3_14374_RakhiVasavadaL.64x64.jpeg Rakhi Vasavada's Avatar

    Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    2073
    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
  • http://ww2.justanswer.com/uploads/BU/BusinessTutor/2012-2-2_115741_Kouki2.64x64.jpg Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany

    Tutor

    Satisfied Customers:

    1890
    More than 5000 online tutoring sessions.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    1755
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JK/jkcpa/2011-1-16_182614_jkcpa.64x64.jpg JKCPA's Avatar

    JKCPA

    CPA

    Satisfied Customers:

    838
    Bachelors degree and CPA with Accounting experience.
  • http://ww2.justanswer.com/uploads/starside8/2010-2-16_55433_DSCN1175.JPG Eric's Avatar

    Eric

    Financial Manager

    Satisfied Customers:

    558
    Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
  • http://ww2.justanswer.com/uploads/FA/fastfile/2011-12-15_23139_Klein2011small.64x64.jpg R. Klein, EA's Avatar

    R. Klein, EA

    Accountant

    Satisfied Customers:

    397
    Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    324
    NASD Licensed Rep, 1997-2001, Business Attorney