. When assets are purchased as a group, how should the acquisition cost of the individual assets be determined?
2. Why do you suppose that most companies use the straight line method of depreciation?
3. Assume that your local ridge gives you a $1,000 loan at 10% per year but deduct the interest in credit. Is 10% the "real" rate of interest that you will pay? How could the true interest rate be calculated?
Answers: How you divide the cost of assets bought surrounded by a group is immaterial - any artificial gain/loss will be work against by a corresponding gain/loss in one of the other assets. Using a disinterested market price % justification is often the simplest solution, and can minister to a bit with insurance.
Companies prefer straight-line because here are less monitoring costs, and a monkey (read: first-year trainee) couldn't screw it up. However, nearly ALL companies with the sole purpose use this for in-house accounting, or investor relations. For things that matter (TAXES), they use accelerate depreciation to leverage the time value of money.
The Effective Annual Rate (EAR) is 1/9 or 11.1%. This is in recent times to take control of people who are too inefficient to look past the APR (10%).
Edit for Don:
bank make loans similar to that all the time, and it's clearly legal. There is an implied assumption that the 10% is an APR and that this is a short-term loan. EAR is the proper means of access to approach this problem, not just assigning it to infinity.
If we enjoy a group of assets, purchased as a group, we obviously enjoy to use some fair but arbitrary spring to assign cost.
Standard practice is to assign to each asset a event market attraction, that is an evaluation based significance.
Sum up all the bazaar values. Now compute a factor based on he cost of the group and the objective market good point sum, such that when you multiply fair open market value by factor you carry the market attraction sum.
Apply that factor to each individual asset's FMV, to come up next to a cost of acquisition.
Straight rank depreciation for accounting purposes, as compared with import tax purposes, allows for simplicity of charging business groups for what is effectively rental of the asset.
It places on the onus of getting that value out of the asset contained by that time on the business using the asset.
If your bank take the 10% interest for a 10 year period out of the amount turned over to you, so that you catch nothing and own to pay backbone the principal, the real rate of interest is infinite.
Your problem here is that you enjoy not specified a term for the loan. If it be one year, you would be paying $1.00 to borrow $9 for a year if, and only if, repayment be at teh end of the year. That ability interest of 11.111%. But the rate is different, going to infinity as you approach 10 years.
It would be illegal.
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2. Why do you suppose that most companies use the straight line method of depreciation?
3. Assume that your local ridge gives you a $1,000 loan at 10% per year but deduct the interest in credit. Is 10% the "real" rate of interest that you will pay? How could the true interest rate be calculated?
Bad to invest within utilities?
Answers: How you divide the cost of assets bought surrounded by a group is immaterial - any artificial gain/loss will be work against by a corresponding gain/loss in one of the other assets. Using a disinterested market price % justification is often the simplest solution, and can minister to a bit with insurance.
Companies prefer straight-line because here are less monitoring costs, and a monkey (read: first-year trainee) couldn't screw it up. However, nearly ALL companies with the sole purpose use this for in-house accounting, or investor relations. For things that matter (TAXES), they use accelerate depreciation to leverage the time value of money.
The Effective Annual Rate (EAR) is 1/9 or 11.1%. This is in recent times to take control of people who are too inefficient to look past the APR (10%).
Edit for Don:
bank make loans similar to that all the time, and it's clearly legal. There is an implied assumption that the 10% is an APR and that this is a short-term loan. EAR is the proper means of access to approach this problem, not just assigning it to infinity.
Why does VISA (V) hang on to going down?
If we enjoy a group of assets, purchased as a group, we obviously enjoy to use some fair but arbitrary spring to assign cost.
Standard practice is to assign to each asset a event market attraction, that is an evaluation based significance.
Sum up all the bazaar values. Now compute a factor based on he cost of the group and the objective market good point sum, such that when you multiply fair open market value by factor you carry the market attraction sum.
Apply that factor to each individual asset's FMV, to come up next to a cost of acquisition.
Straight rank depreciation for accounting purposes, as compared with import tax purposes, allows for simplicity of charging business groups for what is effectively rental of the asset.
It places on the onus of getting that value out of the asset contained by that time on the business using the asset.
If your bank take the 10% interest for a 10 year period out of the amount turned over to you, so that you catch nothing and own to pay backbone the principal, the real rate of interest is infinite.
Your problem here is that you enjoy not specified a term for the loan. If it be one year, you would be paying $1.00 to borrow $9 for a year if, and only if, repayment be at teh end of the year. That ability interest of 11.111%. But the rate is different, going to infinity as you approach 10 years.
It would be illegal.
Resolved Questions: