In the example of Alex in the text, no allowance was made for the fact that an item had been in use for some time. Whilst it is intuitively obvious that the utility of most things declines over time, it is more difficult to identify the extent of that decline over a given period. In addition, even if we could identify the decline in utility and the utility remaining we still have to assign some monetary amount to both parts.

We said in the chapter that this was done by arriving at a written-down cost or value. For each of the following examples suggest, with reasons, the best method for arriving at the written-down cost or value.

(a) A machine which will produce 10 000 items and will then need to be replaced. Production each year is to be matched to sales and estimates of sales are I 000 units in year I, 2500 units in year 2.

Sales in the years after that cannot be forecast with any accuracy.

(b) A leasehold property on a five year non-renewable lease.

(c) A company car.

(d) A microcomputer.

(e) Computer software.