Question

Compare and contrast the three (3) methods for depreciating plant assets. Recommend the method that maximizes profits for both a shorter period of time and a longer period of time. Please cite

Answer 1

When talking about which method of depreciation produces the highest net income, it is vital to understand the methods of depreciation.

Straight-line: This method states that depreciation expense per year = asset cost – residual value ÷ estimated useful life of the asset in years. This method, which divides the depreciation equally over the life of the property or asset, is the simplest one to calculate.
Units of production: This method states that depreciation rate per unit = asset cost – residual value ÷ estimated total number of units produced over the useful life of the asset. This method depreciates the asset based on how much you use it.
Service hours: This method states that depreciation rate per service hour = asset cost – residual value ÷ estimated total number of hours of useful service over the useful life of the asset. As the name implies, this method depreciates the asset based on its hours of useful service.
Sum of years-digits: This method, also called accelerated depreciation, states that the depreciation expense per year = (asset cost – residual value) × remaining useful life in years ÷ sum of years digits. For this method, depreciation is greater for earlier years than later years.
Declining balance: This method, also called the double-declining balance method and also an accelerated depreciation strategy, states that book value at the end of a year = asset cost × (1 – depreciation rate)n where n = estimated number of years of useful life of the asset. With this method, depreciation expense declines steadily over the useful life of the asset.

There is no best method of depreciation. Which method is best for you depends on your business and financial needs. However, it can be helpful to compare straight-line depreciation and accelerated depreciation. In the end, the depreciation method that gives the highest net income depends on when you want to book the higher income – early on or later. The choice depends on when you need the tax deduction the most.
I think you will get clarified after reading this essay
Each method of depreciation has unique feature and different depreciation amount
So we need to select them on that basis,which gives us more profit