Choose one of the depreciation methods that you feel would be more feasible for a hospital

to use. Explain your rationale.

Double Declining Balance method would be better for the hospital to use. Hospitals normally
have a large amount of asset’s that they claim in their accounting each year. Assets values that
are calculated with this method lose value quickly and lower the overall asset balance for the
hospital. While this method can be more complex to calculate, hospitals would normally have
better accounting software to complete the balance sheets. This also allows the value of the asset
to be decreased earlier and defer tax burden.

Choose one of the depreciation methods that you feel would be more feasible for a
physician practice to use. Explain your rationale.

Straight line method would be best for the physician practice. This is a small practice with a
limited amount of assets. This method is easy to calculate with the fewest errors. This also stays
most consistent with reporting on balance sheets and tax returns causing the fewest errors.
(Yasaswi, 2018)

Explain why it is important for a healthcare organization or a physician practice to use a

depreciation method.

This allows the office to lower the value of its assets throughout the life of the asset and reduce
its long-term tax burden.

What depreciation method do you recommend Dr. Smith and Dr. Brown use to purchase a
fixed asset? Explain the rationale for your choice.

The best depreciation method for this small practice is the straight-line method.
Fixed assets are long-term expenses such as property or equipment. These items are kept in the
physician practice for a longer duration and are not converted to cash within the first fiscal year.

References:

Baker, J. J., Baker, R. W., Dworkin, N. R. (2017). Health care finance: Basic tools for
nonfinancial managers (5th ed.). Retrieved from https://content.ashford.edu
Yasaswi, K., Shankar, A. (2018) Common Error in Depreciation Computation. https://doi-
org.proxy-library.ashford.edu/10.5281/zenodo.1334469