gen-define-depreciation-methods-and-give-one-short-worked-exampl-d36e

Define depreciation methods and give one short worked example.

# Depreciation Methods **Depreciation** is the systematic allocation of an asset's cost over its useful life. Here are the main methods: ## 1. **Straight-Line Method** Equal expense each year = (Cost - Salvage Value) / Useful Life ## 2. **Declining Balance Method** Accelerated depreciation using a fixed percentage of the book value each year ## 3. **Units of Production Method** Depreciation based on actual usage or output ## 4. **Sum-of-Years-Digits Method** Accelerated method using a fraction based on remaining life --- ## Worked Example: Straight-Line Method **Given:** - Machine cost: $10,000 - Salvage value: $1,000 - Useful life: 3 years **Solution:** Annual Depreciation = (Cost - Salvage Value) / Useful Life Annual Depreciation = ($10,000 - $1,000) / 3 = **$3,000 per year** **Depreciation Schedule:** | Year | Beginning Value | Depreciation | Accumulated Depreciation | Ending Book Value | |------|----------------|--------------|-------------------------|-------------------| | 1 | $10,000 | $3,000 | $3,000 | $7,000 | | 2 | $7,000 | $3,000 | $6,000 | $4,000 | | 3 | $4,000 | $3,000 | $9,000 | $1,000 | The asset reaches its salvage value of $1,000 after 3 years.