Investors ask Sarah which depreciation method TechStart uses — she needs a side-by-side comparison ready
Sarah is in a meeting with a potential investor. The investor reviews TechStart's financials and asks: "I see you use straight-line depreciation. Have you considered double-declining balance? How does your method choice affect your reported profit?"
Sarah has the asset register from Lesson 05, but it only shows one method per asset. She needs a side-by-side comparison that shows how each method changes expense timing, net income, and book value — and she needs to defend the choice with evidence.
Why This Matters
Depreciation method choice affects reported profit, tax timing, and how investors read your financial health. A professional comparison workbook lets you show the impact clearly and defend your policy with data — not guesses.
1. An investor asks why TechStart uses straight-line instead of double-declining balance. What is the best answer?
2. TechStart buys a $20,000 server with a 4-year life and $2,000 salvage value. Which method shows higher Year 1 expense?
3. What is the biggest risk when comparing depreciation methods in a workbook?
4. Book value at the end of an asset's life should equal what value regardless of method?
Discussion Prompt (3 minutes):
If you were Sarah, what would you want to show the investor? Discuss:
- Why might a company prefer straight-line for financial reporting?
- When does double-declining balance give a more honest picture?
- What workbook evidence would make your recommendation credible?