Which of the following statements is true regarding depreciation methods?a. The use of a declining balance method of depreciation will produce lower depreciation charges in the early years of an asset’s life compared to the straight-line depreciation method.b. Over the life of an asset, a declining balance depreciation method will recognize more depreciation expense relative to the straight-line method.c. The use of a declining balance method instead of the straight-line method will produce higher book values for an asset in the early years of the asset’s life.d. The use of a higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Which of the following statements is true regarding
a. The use of a declining balance method of depreciation will produce lower depreciation charges in the early years of an asset’s life compared to the straight-line depreciation method.
b. Over the life of an asset, a declining balance depreciation method will recognize more depreciation expense relative to the straight-line method.
c. The use of a declining balance method instead of the straight-line method will produce higher book values for an asset in the early years of the asset’s life.
d. The use of a higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement
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