The primary advantage of declining-balance depreciation over straight-line depreciation is that,while the total amount of depreciation and thus tax savings is unchanged,charges are taken sooner.This means that the firm gets the benefits of the tax savings sooner,which increases their present value.

Question

Quizplus · Accepted Answer

Declining-balance depreciation allows for larger depreciation charges in the earlier years of an asset's life, resulting in greater tax savings and benefits to the firm's present value over time. This is in contrast to straight-line depreciation, where depreciation charges are spread evenly over an asset's life, resulting in smaller tax savings in the earlier years. Therefore, the statement that declining-balance depreciation provides tax savings sooner and increases present value is true.

The Primary Advantage of Declining-Balance Depreciation Over Straight-Line Depreciation Is