6.5 So far as the following fixed assets are concerned:

(a) What depreciation method do you think would be most appropriate and why?

(b) Discuss the ways in which obsolescence may affect the asset:

1. A delivery van used by a baker.

2. A filing cabinet.

3. A shop held on a 20-year lease.

4. A plastic moulding machine which has been specially constructed to manufacture a new novelty - plastic stetsons. It is expected that these will be all the rage next Christmas and thereafter sales will continue for a year or two but at a very much lower level.

5. Machine X. This machine is used by its owners as a standby machine when the normal machines are down for maintenance or have broken down. Occasionally machine X is used to increase capacity when there is a glut of orders. Machine X is of the Dumbo type, rarely used nowadays because modern machines are far more efficient. When these machines are operated at full capacity they last for about four years before they become completely worn out.