The straight-line depreciation method and the double-declining-balance depreciation method:
A)Produce the same total depreciation over an asset's useful life.
B)Produce the same depreciation expense each year.
C)Produce the same book value each year.
D)Are acceptable for tax purposes only.
E)Are the only acceptable methods of depreciation for financial reporting.

Question

Quizplus · Accepted Answer

The straight-line depreciation method and the double-declining-balance depreciation method do not produce the same depreciation expense each year, nor do they produce the same book value each year. However, they do produce the same total depreciation over an asset's useful life. This is because the straight-line method depreciates the asset by an equal amount each year, while the double-declining-balance method depreciates the asset by a fixed percentage each year, resulting in a higher depreciation expense in the earlier years and a lower expense in the later years. Both methods are acceptable for tax and financial reporting purposes, although certain tax regulations may limit the use of the double-declining-balance method.

The Straight-Line Depreciation Method and the Double-Declining-Balance Depreciation Method