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Question
_______ method of depreciation takes into account the element of interest on capital outlay and seeks to write off the value of the asset as well as the interest lost over the lift of the asset.
_______ method of depreciation takes into account the element of interest on capital outlay and seeks to write off the value of the asset as well as the interest lost over the lift of the asset.
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Solution
The correct option is A Annuity
The annuity method of depreciation is a
process used to calculate depreciation on an asset by calculating its rate of
return as if it was an investment. This method requires the determination of
the internal rate of return (IRR) on the cash inflows and outflows of the
asset. The IRR is then multiplied by the initial book value of the asset, and
the result is subtracted from the cash flow for the period in order to find the
actual amount of depreciation that can be taken. It is commonly used with asset
that have a large purchase price and long life.
The annuity method of depreciation is a process used to calculate depreciation on an asset by calculating its rate of return as if it was an investment. This method requires the determination of the internal rate of return (IRR) on the cash inflows and outflows of the asset. The IRR is then multiplied by the initial book value of the asset, and the result is subtracted from the cash flow for the period in order to find the actual amount of depreciation that can be taken. It is commonly used with asset that have a large purchase price and long life.
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