Suggested Methods for Depreciation
Brandy Bogue
Western Governors University

There is four method of depreciation that a company can use to depreciate their assets. The First method is the activity depreciation method also known as the variable-charge or units of production approach depreciation method. There is also the straight-line depreciation method, sum-of-the-year-digits depreciation method and declining-balance depreciation method.
I recommend that Fan Company A’s use the straight-line method of depreciation to depreciate their equipment. Straight-line depreciation method is calculated by taking the cost minus the salvage value divided by the useful life and that amount is expensed each month. Straight-line depreciation is the ideal method to use because it is easy to understand and simple to calculate. However there is a disadvantage to the straight-line method of depreciation since the amount expensed is the same each year. The company is assuming the equipment’s usefulness will remain the same year over year. The reason for my recommendation is straight-line depreciation method is the easier to calculate the annual deprecation amount then the double-declining balance or the sum-of-digits-years, and activity method of depreciation.
The activity depreciation method also known as the variable-charge or units-of-production approach depreciation method is calculated by taking the assets value minus the salvage value and dividing by the amount of time the asset will be used or the units it will produce. The advantage to this method of depreciation is when the asset is in use a greater amount of depreciation will be expensed. The disadvantage to this method of depreciation is if the asset is not in use it could deteriorate from the elements and lose value.
The sum-of-years-digits depreciation method is calculated taking the value of the asset minus the