Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.
A) more
B) less
C) equal
D) This cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The straight-line depreciation method spreads the depreciation expense evenly over the useful life of the asset. This means that in the early years of the asset's life, the depreciation expense will be higher compared to an accelerated method that frontloads the depreciation expense. A higher depreciation expense results in lower reported profits and therefore lower taxable income, leading to higher tax savings in the early years under an accelerated depreciation method.

Using the Straight-Line Depreciation Method Will Cause a Company to Incur