Many companies use an accelerated depreciation method because:
A) It is required by the tax code.
B) It is required by financial reporting rules.
C) It yields larger depreciation expense in the early years of an asset's life.
D) It yields a higher income in the early years of the asset's useful life.
E) The results are identical to straight-line depreciation.

Question

Quizplus · Accepted Answer

Accelerated depreciation methods, such as the double-declining balance or sum-of-the-years'-digits methods, allocate a larger portion of the asset's cost to depreciation expenses in the early years of the asset's life, and a smaller portion in later years. This is because these methods assume that the asset will be more productive and generate more revenue in its early years. As a result, accelerated depreciation methods yield a larger depreciation expense in the early years of an asset's life, which can help to reduce taxable income and lower taxes paid in those years. Additionally, accelerated depreciation methods may help to better match the cost of the asset with the revenue it generates, which can improve the accuracy of financial statements.

Many Companies Use an Accelerated Depreciation Method Because