 In this discussion, we will discuss the discussion question of compare and contrast different depreciation methods. So if we see a question like this, we may first want to discuss what is a depreciation method? What does it relate to? And of course, depreciation relates to property, plant and equipment. Property, plant and equipment is going to be an asset. The asset is on the books rather than being expensed at the point in time of purchase due to the fact that it's going to have an extended life, a life more than one year at least, typically, or one accounting period. And therefore, we need to allocate the cost of it to the periods in which it will be used. Typically, it will be a tangible asset as well, something that we can touch and feel and hold and whatnot, tangible asset. And we're going to depreciate that over its useful life. So then we have this problem then, of course, of how are we going to do that? How are we going to depreciate this property, plant and equipment over its useful life? What method would be best to do that? And if you were to consider this, if you were to have this problem and you were thinking, you can think about how someone came up with these methods, you can think about, well, if I have this piece of equipment that costs $10,000, I'm going to use it for, you know, five years, then how can I come up with some way for me to allocate over the five years the cost of this equipment? If I don't do that, what will be a problem? It'll look like my net income is way lower than it should be in year one. Just because I purchased the equipment, it'll look like year two, I had a much better year when I really didn't because I'm using the same piece of equipment in year two as I did in year one. So I don't want to allocate all of the costs, all of the expense of the purchase in year one because it makes the net income look distorted and not comparable. Therefore, to be in accordance with the matching principle, it would make more sense for me to allocate the expense in some way over the useful life. So one way we can do that is we can just say, well, why don't I just take the cost of the equipment divided by the useful life, and then we'll just expense an even amount over the time periods. And that's, of course, what most people would think of if we were just going to try to figure this out. And that would be a straight line method. That's probably the most common method or the method that most people would think of in method on which most other methods are derived. So now we can also think of different types of methods as well. One would be an accelerated method. And this would be one where we might say, well, that makes sense if we allocate this over the useful life and have an even allocation, have the net income go down evenly based on the appreciation expense being even over the useful life. However, you know, if you think it's something like a car, it's the same for most equipment, the usefulness of it goes down over time, meaning I'm probably getting more value out of it in the beginning years than to the ending years. So if you start to consider going down that road, then we want some kind of accelerated method, meaning it makes sense in that thinking logically in that fashion that we should be expensing more in year one than in year two. We shouldn't have an even straight line depreciation. We should be taking that cost and allocating more of it to the first year than to the last year that we use it in operations. And the most common method there would be the double declining balance method. And that's one in which we're basically going to take the straight line rate and double it. And in so doing, we'll front load the depreciation. So, and we'll take the book value each year, we'll take the book value, and then we'll multiply it down this double declining rate, which was double the straight line rate. And that'll give us our same endpoint, we're going to end at the salvage value. So it's just a timing difference. And that's really key in this type of essay question. So all the depreciation methods will get to the same point at the end. It's just a timing difference, meaning the straight line method will have less depreciation in year one than the double declining method. And therefore, the net income under the double declining method will be lower than that income in year one under the straight line method, the net income will be higher because the because the relationship between net income is revenue minus expenses. And then at the end of it, it'll reverse, it'll switch itself out, meaning the straight line method will have a higher depreciation in the later years, and therefore, a lower net income. And the double declining balance method will have a lower depreciation expense in the later years, and a higher net income, therefore, so it works itself out. In the end, it's just a timing difference. The other method that is fairly common or could be useful, and it has its own uses is going to be the units of production method. And this method might be thought to be more exact in many cases, meaning like if you think it's something like your car, it might you might think of these methods on how would you depreciate the car well, we could use just the time I think the car is going to last, you know, five to 10 years and just divide the cost by five or 10 years, we can use that same five to 10 years and use a double declining method and depreciate more in year one than your 10, which kind of makes sense if we just think of the value of the car. Or we could say why don't why are we using time time is irrelevant compared to a better factor that we can use to allocate costs, which would be the mileage possibly, that'd be an example of a unit that we could use. So we could try to say, well, I'm not going to look at the total time that the car is going to be useful, I'm going to look at the total mileage that we think it's going to be useful as it's going to be useful for 100,000 miles. Then I'll say, well, that's the life of the car and miles not in time. And then we'll take that and divide by divided into the cost of the car. And then we'll get a cost per month. Then when we allocate the cost each time period each year or each month, we're going to have to take what we'll have to do is count the miles for that time period. And that's kind of the downfall of units using this method is probably more accurate. But we have to track the miles, we have to first know how many miles we think the car is going to go, then we have to track the miles per period. And then we have to take our mileage rate times the number of miles that happened during that time period that given us the depreciation. So that's going to be a better probably cost driver, but often not done in many cases because of it's a bit more complicated to do with there's a few more factors in terms of us tracking the miles. Now if we had some other type of unit doesn't have to be miles. If we had a, if we had it like a printer, it might say that the printer will produce so many pages. That's the lifetime of the printer, it's going to produce this many pages. So then we would take the cost of the printer divided by the pages and then track how many pages it's producing each period. And obviously any type of production if we're talking about units, if we have some type of machinery that's producing types of units, types of bottles, types of bottle caps or something like that, then we could try to see, okay, how many units do we think this is going to make, then we'll divide that into the cost and then we'll have to track how many units are being made each time in order to allocate depreciation.