During Week Four Team D discussed the objectives learned in Week Three. In the following paragraphs, Team D will provide examples of the effect of using different depreciation methods and its effects of decision-making by the management. Team D will also analyze why reporting intangible assets are challenging for accountants. Depreciation is a way for a company to reduce the value of a tangible asset over its useful life. Assets such as buildings, equipment, vehicles, and machinery should be depreciated. The amount of depreciation expense is provided on the income statement during the period referenced on the heading. The accumulated or cumulative depreciation total is reported as an expense on the income statement when the assets are acquired.
The assets cost are used up during a portion of the accounting period. Straight line method takes the amount to be depreciated and divides it evenly over the useful life of the asset. Straight line deprecation records an equal amount for every year of an asset’s usefulness until it is scraped or used up. This amount is on the income statement and allows for the steady deprecation cost amounts and better earnings. The unit of production method an asset is assigned a finite number of units it should produce, as the asset is used it eats away at the remaining units.
The double declining balance is calculated just like the straight line, just at the accelerated rate of 2 times. Intangible assets are reported on a company’s financial statements. Examples of intangible assets include: goodwill, patents, trademarks, copyrights, brand names, and companies’ methodology. Intangible assets are often challenging because they are long-term and do not have physical existence and are not classified as a monetary asset. The worth of a intangible assets are estimated and depends on many different factors.