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You are advising a client, who has just gone into business, in selecting accounting depreciation policies. The client's capital assets comprise of the following assets:
You are advising a client, who has just gone into business, in selecting accounting depreciation policies. The client's capital assets comprise of the following assets:
- Office furniture with a useful life of 10 years
- Computer Hardware which is expected to be obsolete in 5 years
- An 18-wheeler truck which will be used for long-distance deliveries within Canada that can be driven up to 400,000 km.However, delivery routes vary and the truck is not expected to be on the road during the entire year.
By referring to the matching principle, explain the best choice of depreciation policy (straight-line, double-diminishing-balance or units of production) for each of the capital assets, and also comment on the duration (e.g. years) of depreciation in each case.
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