Question

what 4 factors need to be considered when determining depreciation? show in the order they take place

Answer 1

1.Cost of Assets:The acquisition cost of the asset is considered here along with other incidental costs which needed to be capitalized.

2.Estimated Salvage Value:It is the amount which the company expects to recover on the disposal or sale of the asset.Salvage value needs to be determined when the asset is acquired.

3.Estimated life of the Asset:It is the time frame that the company expects to use the asset this can be expressed in terms of no. of years, no. of units produced or no. of machine hours used, the estimated is also crucial in determining the method of depreciation to be used.

4.Obsolescene:Before calculating the depreciation a company should consider the obsolscene since it might affect the useful life of the asset and due to obsolscene the asset might become scrap earlier then expected.