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Choice of depreciation method; current versus long term liability

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1. What factors should a company consider when selecting a depreciation method?

2. Why would you say is it important to separate current liabilities from long-term liabilities?

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Solution Summary

Your tutorial is 266 words and gives you three factors that may guide your depreciation decision and a reason that current liabilities need to be segregated from long term ones.

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What factors should a company consider when selecting a depreciation method?

The factors would be typically cost/benefit, reflective of the asset, and/or income management related. Depreciation calculations can be simple (straight-line) or complicated (units of production). Most companies choose straight line, not because it best matches the asset's decline in usefulness or gives them a particular budget or profit outcome, but because it is easy to compute and easy to ...

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Carol Sargent, PhD
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  • MSc, University of Virginia
  • PhD, Georgia State University
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