Depreciation Concepts

1. Explain the conventional accounting concept of depreciation accounting, and discuss its conceptual merit with respect to (a) the value of the asset, (b) the amount(s) expensed, and (c) the discretion of management in selecting the method.

2. Answer the following:

   1. Explain the factors that should be considered when applying the conventional concept of depreciation to the determination of how the value of a newly acquired computer system should be assigned to expense for financial reporting purposes. (Ignore income tax considerations for this case.)

   2. What depreciation methods might be used for the computer system?

   3. Choose a depreciation method and describe how it is used. Explain how depreciation is calculated using the method and whether or not you feel the depreciation method gives a good estimate of the cost allocation of the asset.