(Solution) BUS 1102 Discussion 6: Methods of Depreciation -Liam

COURSE

BUS 1102 – Basic Accounting

Liam is struggling to determine which deprecation method he should use for his new silk-screening machine. He expects sales to increase over the next five years. He also expects (hopes) that in two years he will need to buy a second silk-screening machine to keep up with the demand for products of his growing company. Discuss which depreciation method makes more sense for Liam:

  • Higher expenses in the first few years, or keeping expenses consistent over time?
  • Or would it be better for him to not think in terms of time, but rather in the usage of the machine?
  • Please explain your choice.

Reply to your peers and provide feedback on their choice.

SOLUTION  

Hello Class, 

Discuss which depreciation method makes more sense for Liam

As a company owner, Liam may benefit more from the Units of Production depreciation method. Since Liam started the company, the first year of operation should be much less fruitful than the third or fifth. Because of this, I wouldn’t recommend using Straight-Line Depreciation.

Higher expenses in the first few years, or keeping expenses consistent over time?

Keeping costs stable throughout time is preferable from a purely mental perspective since this allows for more precise revenue and cost control….please click the icon below to purchase the solution at $5