Answer
The composite method is ideal for situations requiring the depreciation of multiple accounts of assets. The approach works well when the assets' categorizations are different, and their useful lives are divergent. The composite method is advantageous given that it makes the process of bookkeeping simpler. Moreover, the composite approach can potentially average out the errors attributed to understatement or overstatement of depreciation amounts. Consequently, periodic income is not distorted by losses and gains attributed to asset sales. However, the composite approach requires complex mathematical computation. Moreover, the composite method cannot specify the depreciation of a particular equipment within a group.
Work Step by Step
The composite method is ideal for situations requiring the depreciation of multiple accounts of assets. The approach works well when the assets' categorizations are different, and their useful lives are divergent. The composite method is advantageous given that it makes the process of bookkeeping simpler. Moreover, the composite approach can potentially average out the errors attributed to understatement or overstatement of depreciation amounts. Consequently, periodic income is not distorted by losses and gains attributed to asset sales. However, the composite approach requires complex mathematical computation. Moreover, the composite method cannot specify the depreciation of a particular equipment within a group.
