Depreciation Methods Before 1981

Before 1981, the organization could choose any one of four different methods for depreciating any asset:

  • Straight-line depreciation

  • Declining-balance depreciation

  • Declining-balance switching to straight-line depreciation

  • Sum-of-the-years-digits depreciation

Straight-line and declining-balance time value functions were already introduced earlier in this chapter. Each of these methods is discussed in more detail below.

After first choosing the depreciation method, the next step in pre-1981 depreciation accounting was to estimate the asset's useful life. Intuitively, the useful life of the asset is an estimate of how long it will likely last in business use. Properly cared for, a car can last for 10 years or more, but ...

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