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.

Question

Business

Paxton Clements

2 October, 02:05

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.

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Answers (1)

Know the Answer?

Celia Schultz · Answer 1

The correct answer is letter "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.

Explanation:

Depreciation distributes the cost and cost over the useful life of the assets of tangible and real assets. A business could depreciate an asset over a period of up to thirty years, depending on the type of asset it is. There are many depreciation methods but, among the most common we can find the Straight-line method, the Double Declining Balance method, and the Units of Production method. As long as the estimated life of the asset and its residual value is high, the amount filed for the depreciation will be lower.