Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life.Which of the following statements is true?
A)Company A will have higher depreciation expense in the early years but Company B will have the higher expense towards the end of the asset's useful life.
B)Company A will consistently have higher depreciation expense until residual value is reached.
C)Company B will have higher depreciation expense in the early years but Company A will have the higher expense towards the end of the asset's useful life.
D)Company B will consistently have higher depreciation expense until residual value is reached.

Question

Quizplus · Accepted Answer

Accelerated depreciation methods allow for higher depreciation expense in the earlier years of an asset's life, while straight-line depreciation methods allocate the same amount of depreciation expense over the entire useful life of the asset. Therefore, Company A will have higher depreciation expense in the early years, and Company B will have the same amount of depreciation expense every year until the end of the asset's useful life.

Company a Uses an Accelerated Depreciation Method While Company B