Question

Which depreciation method would you use if you were trying to minimize income taxes? Which method would you choose if you wanted to maximize net income? Suppose you wanted to do both?

Answer 1

Which depreciation method would I use if I am trying to minimize income taxes would be Double declining balance method.

Double declining balance method gives highest amount of depreciation expenses so it will give lowest income in comparison to other methods and ultimately lower income means lower taxes.

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Which method would I use if I want to maximize income would be Straighjt line method.

Generally straight line method gives lowest depreciation expense which means highest income.

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If I want both then Units of production method would be best.

Units of production method give a higher depreciation than straight line and lower depreciation than double declining method. By using units of production method I can fulfill both my needs upto some level.