Chapter 7, Problem 47E

Characteristics of Depreciation Methods

Below is a common list of depreciation methods and characteristics related to depreciation.

Depreciation Methods

a. Straight-line depreciation method

b. Declining balance depreciation method

c. Units-of-production depreciation method when actual units produced increases over the life of the asset

Characteristics

1. Results in depreciation expense that decreases over the life of the asset.

2. Results in depreciation expense that increases over the life of the asset.

3. Allocates the same amount of cost to each period of a depreciable asset’s life.

4. Calculated by multiplying a constant depreciation rate by depreciable cost.

5. Calculated by applying a constant depreciation rate to the asset’s book value at the beginning of the period.

6. Results in lowest income taxes in early years of the asset’s life.

7. Consistent with the matching principle.

Required:

Match one or more of the depreciation methods with each characteristic.