Please, can I get some help with these questions?
1. What are the differences among valuation, depreciation, amortization, and depletion? Is it appropriate to calculate depreciation using two different methods? Why?
Valuation is the determination of worth of an asset on a particular date, for example, the fixed assets valuation is done on the basis of purchase cost less the cost of assets used up to date. The used value of an asset has different names depending on the nature of assets. The man made fixed asset usage is recoded using term depreciation, the natural fixed assets usage is recorded using the term depletion and the intangible fixed assets usage is recorded using amortization.
Two different methods can be used, one for accounting purpose and other for tax purpose.
2. What types of industries have unearned revenue? Why unearned revenue is considered a liability? When is the unearned revenue recognized in the financial statements?
Insurance company do have unearned revenues, as the premium is received in advance on periodic basis. It cannot be considered as revenue unless the period has not expired, as the insurer can ask for refund of premium, therefore it is recorded as liability. When the period expires for which premium has been paid, it should be recognized as revenue.
3. Which depreciation method provides you with the highest depreciation expense in the first year? Why?
The double declining balance method gives the highest amount of depreciation in the first year, it is for two reason, one the rate is doubled as the name suggests and the second the salvage value is not deducted from cost to arrive the amount of the depreciation.