Multiple Choice
Straight-line depreciation expense for a depreciable asset is calculated by taking which of the following amounts?
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8. Long Lived Assets
Depreciation: Straight Line
Multiple Choice
Which of the following depreciation methods allocates the cost of long-term assets based solely on the passage of time?
A
Straight-line method
B
Sum-of-the-years'-digits method
C
Units-of-production method
D
Double-declining balance method
Verified step by step guidance1
Understand the concept of depreciation: Depreciation is the process of allocating the cost of a tangible asset over its useful life. Different methods exist to calculate depreciation based on various factors such as time, usage, or accelerated expense recognition.
Review the Straight-line method: This method allocates the cost of an asset evenly over its useful life. It is based solely on the passage of time and does not consider usage or other factors. The formula for annual depreciation is: .
Examine the Sum-of-the-years'-digits method: This method is an accelerated depreciation method that allocates higher depreciation expense in the earlier years of an asset's life. It is not based solely on the passage of time but rather on a weighted calculation.
Analyze the Units-of-production method: This method allocates depreciation based on the actual usage or production output of the asset. It is not time-based but usage-based. The formula is: × Units Produced .
Evaluate the Double-declining balance method: This is another accelerated depreciation method that applies a higher depreciation rate in the early years of an asset's life. It is not based solely on the passage of time but rather on a percentage of the asset's book value.
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