Under what conditions would a company most likely adopt the double-declining-balance method for financial reporting?
A)The company has high technology,robotic equipment in its plant that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the assets' lives.
B)The company wants to maximize its net income during the earlier years of the asset's life.
C)The company wants to maximize the asset's book value in the earlier years of the asset's life.
D)The company wants to maximize the total depreciation expense over the life of the asset.

Question

Quizplus · Accepted Answer

The double-declining-balance method would be most appropriate if the asset in question is technology or equipment that becomes obsolete quickly and declines in utility to the company more rapidly in the early years of the asset's life. This method front-loads the depreciation expense, resulting in higher depreciation expense and lower net income in the earlier years, which aligns better with the actual decline in usefulness of the asset. Therefore, option A is the best choice. Options B, C, and D do not necessarily align with the goals of adopting the double-declining-balance method.

Under What Conditions Would a Company Most Likely Adopt the Double-Declining-Balance