Depreciation:
A) Is always considered a period cost.
B) Could be a product cost or a period cost depending on the use of the asset.
C) Is usually based on the declining-balance method.
D) Per books is usually higher than MACRS in the early years of an asset's life.

Question

Quizplus · Accepted Answer

Depreciation could be classified as a product cost when it is included in the cost of goods sold and as a period cost when it is not related to production activities. The method used for depreciation can vary and may include the declining-balance method or straight-line method. MACRS (Modified Accelerated Cost Recovery System) is a tax-based depreciation method that may differ from depreciation per books. Therefore, it is not necessarily true that depreciation per books is higher than MACRS in the early years of an asset's life.