Question

Please respond to all questions related to Fixed Assets.

1. Is it necessary for a business to use the same method of computing depreciation:

(a) for all classes of its depreciable assets,

(b) for financial statement purposes and in determining income taxes?

2. For some of the fixed assets of a business, the balance in Accumulated Depreciation is exactly equal to the cost of the asset.

(a) Is it permissible to record additional depreciation on the assets if they are still useful to the business and currently used in operation?

(b) When should an entry be made to remove the cost and the accumulated depreciation from the books?

Answer 1

Answer:

1 a) No, There is number of methods for depreciation the assets out of that Straight line Method is main method and most of organization using that one. This is used for Fixed assets.

Double decline method, 150 Decline Method, Sum of digits method, Units of production.

Units of Production is the depreciation method used for Tools and machinary.

Sum of digits method is the depreciation method used for equipment, track, van etc.

b For financial statment above listed method can be used but for income tax purpose one should used MACRS method declared by irs.

2 a No, there is no permission to record the additional depreciation for currently using machine, but there is a permission to get additional depreciation for new purchase machinery.

2 b) At the time of replace or sell the machinery or equipment that time cost and accumulated depreciation remove from the books.