Question

Find two companies that use the Sum of the Years' Digits method of depreciation. The company that you find must be a real-life U.S. company, listed on one of the stock exchanges. Please make sure that it is an existing company by looking for its ticker symbol.

Answer 1

In accountancy, depreciation refers to two aspects of the same concept:

• The decrease in value of assets (fair value depreciation)
• The allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle)

Depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion. Businesses depreciate long-term assets for both accounting and tax purposes. The former affects the balance sheet of a business or entity, and the latter affects the net income that they report. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. Methods of computing depreciation, and the periods over which assets are depreciated, may vary between asset types within the same business and may vary for tax purposes. These may be specified by law or accounting standards, which may vary by country. There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods. Depreciation expense generally begins when the asset is placed in service. For example, a depreciation expense of 100 per year for five years may be recognized for an asset costing 500.