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.Other things being equal,which of the following is correct?
A)Company A will have higher net income in the early years,but Company B will have higher net income towards the end of the asset's useful life.
B)Company A will consistently have the larger net income until residual value is reached.
C)Company B will have higher net income in the early years,but Company A will have higher net income towards the end of the asset's useful life.
D)Company B will consistently have the larger net income until residual value is reached.

Question

Quizplus · Accepted Answer

Company A will have higher depreciation expense in the earlier years and lower net income when compared to Company B using the straight-line method.This will reverse in the later years.

Company a Uses an Accelerated Depreciation Method While Company B