Company A uses an accelerated amortization 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 amortization 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 amortization expense until residual value is reached.
C)Company B will have higher amortization 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 amortization expense until residual value is reached.

Question

Quizplus · Accepted Answer

Accelerated amortization methods result in higher amortization expenses in the early years of an asset's useful life and lower expenses towards the end, while straight-line methods result in consistent amortization expenses throughout the useful life of the asset. Therefore, Company A will have higher amortization expenses in the early years than Company B, but Company B will have higher amortization expenses towards the end of the asset's useful life.

Company a Uses an Accelerated Amortization Method While Company B