Depreciation Methods and Calculations

This video tutorial covers two primary methods of calculating depreciation: the straight-line method and the diminishing balance method. The straight-line method is described as the simplest and most common approach, where depreciation is calculated evenly over the asset's useful life. The diminishing balance method, on the other hand, involves calculating depreciation based on the asset's carrying value, which decreases each year. The tutorial provides examples and calculations for both methods, emphasizing the importance of understanding key terms like depreciable amount, salvage value, and carrying value.

What are the two depreciation methods discussed in this lesson?

• Reducing balance and accelerated

• Diminishing balance and accelerated

• Straight-line and diminishing balance

• Straight-line and reducing balance

Which depreciation method is known for its simplicity?

• Reducing balance method

• Straight-line method

• Diminishing balance method

• Accelerated method

What is the first step in calculating depreciation using the straight-line method?

• Calculate the salvage value

• Determine the carrying value

• Find the depreciable amount

• Estimate the useful life

How is the depreciable amount calculated in the straight-line method?

• Cost of asset minus accumulated depreciation

• Cost of asset minus salvage value

• Cost of asset minus useful life

• Carrying value minus salvage value

In the straight-line method, how is annual depreciation calculated?

• Carrying value divided by useful life

• Depreciable amount multiplied by percentage

• Depreciable amount divided by useful life

• Carrying value multiplied by percentage

What remains consistent each year in the straight-line method?

• Useful life

• Salvage value

• Depreciation amount

• Carrying value

What is the key difference between the straight-line and diminishing balance methods?

• Use of carrying value

• Use of salvage value

• Use of cost of asset

• Use of useful life

In the diminishing balance method, what is used to calculate depreciation?

• Depreciable amount

• Carrying value

• Useful life

• Salvage value

How is the carrying value determined in the diminishing balance method?

• Carrying value minus salvage value

• Cost of asset minus salvage value

• Depreciable amount minus prior depreciation

• Cost of asset minus accumulated depreciation

What percentage is used in the example for both depreciation methods?

• 10%

• 20%

• 25%

• 15%