Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Depreciation: Straight Line

Financial Accounting

8. Long Lived Assets

Depreciation: Straight Line

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Multiple Choice

Which depreciation method is also known as the 'units of production' or 'units of output' method?

Sum-of-the-years'-digits depreciation method

Units-of-activity depreciation method

Double-declining balance depreciation method

Straight-line depreciation method

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Verified step by step guidance

Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. Different methods exist to calculate depreciation based on how the asset is used or its expected wear and tear.

Learn about the 'units of production' or 'units of output' method: This method calculates depreciation based on the actual usage or output of the asset, making it suitable for assets whose wear and tear depend on usage rather than time.

Compare the given options: The 'units-of-activity depreciation method' aligns with the description of 'units of production' or 'units of output' because it calculates depreciation based on the activity level or output of the asset.

Understand why other methods do not fit: The 'sum-of-the-years'-digits method' accelerates depreciation based on time, the 'double-declining balance method' also accelerates depreciation but uses a fixed percentage, and the 'straight-line method' spreads depreciation evenly over the asset's useful life. None of these are based on usage or output.

Conclude that the correct answer is the 'units-of-activity depreciation method' because it directly corresponds to the 'units of production' or 'units of output' approach.