Contrast the effects of the three depreciation methods on (1) depreciation expense, (2) net income, (3) accumulated depreciation, and (4) carrying amount in each of the following: (a) the early years of an asset's life, and (b) over the total life of the asset. (3) Accumulated Depreciation Increases at a diminishing amount each year All three result in the same total accumulated depreciation Increases by a constant amount each year Increases at a variable amount based on number of units produced (4) Carrying Amount

Contrast the effects of the three depreciation methods on (1) depreciation expense, (2) net income, (3) accumulated depreciation, and (4) carrying amount in each of the following: (a) the early years of an asset's life, and (b) over the total life of the asset. (3) Accumulated Depreciation Increases at a diminishing amount each year All three result in the same total accumulated depreciation Increases by a constant amount each year Increases at a variable amount based on number of units produced (4) Carrying Amount

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question: Which method of depreciation results in a higher depreciation expense in the early years of an asset's life, making it more suitable for assets that rapidly lose their value? A) Straight-Line Depreciation B) Declining Balance Depreciation C) Units-of-Production Depreciation D) Sum-of-the-Years'-Digits Depreciation
Required: State the effect (higher, lower, no effect) of accelerated depreciation relative to straight-line depreciation on a. Depreciation expense in the first year. b. The asset's net book value after two years. Cash flows from operations (excluding income taxes). с.
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Which of the following statements is true when the straight-line method is used to compute amortization? Multiple Chaice Expense recognizes declines as the asset wears out Accumulated amortization is a constant amount during the asset's estimated useful life. Amortization expense per period is the amortizable cost divided by the number of periods in the asset's useful life. The carrying value of an asset is a constant amount during the asset's useful life. None of the other alternatives are correct
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Which method of deprecation results in a lower amount for depreciation each year? ⒸA. Units of production B. Fixed instalment OC. Diminishing balance OD. Straight-line Previous page
A company comparing the use of Straight Line Depreciation (SLD) and Accelerated Depreciation (DDB) in the first year subsequent to the purchase of a capital asset would find: The Fixed Asset Turnover ratio is highest using SLD. The Fixed Asset Turnover ratio is highest using DDB. No difference in the Fixed Asset Turnover ratio. The Total Asset Turnover ratio is highest using SLD.
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When calculating depreciation expense using the straight line method, useful life is expressed as time dollars Units expected to be produced salvage value Next *
With straight-line depreciation, the book value of the asset is reduced by the same amount each year. a. True b. False
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