How to calculate depreciation of oven in Dominos Pizza Case study



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In the example of Depreciation/Amotization ,you have mentioned that Oven expense for 2011- 5lakhs,2012-3.33lakhs,2013-1.67lakhs ..
Q) How can the one time investment of 5 lakhs already made come in the next two years i.e 3.33lakhs and 1.66lakhs . As per my undertansding , % lakhs sud come only once in 2011.

Also the depreciation u have chargerd for 2011 as 1.66 lakhs and in this year only oven is purchased , so how can depreciation come in the same year .?

Kindly answer the questions
Thanks,
Prativa

2 Answer(s)


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Prativa - The 3.3 lakhs in 2012 and 1.6 lakhs in 2013 are not new expenses. They are the value of the oven in those years. Over a period of time the value of the oven decreases (just like if you buy a car).

Depreciation can start in the same year as the purchase.

Does this clarify your doubts. Please let me know if it doesnt.

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