Question
Asked Jan 8, 2020
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Which method almost always produces the most depreciation in the first year?

  • Units-of-production
  • Straight-line
  • Double-declining-balance
  • All produce the same depreciation in the first year.
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Expert Answer

Step 1

Methods of Depreciation: Depreciation refers to the reduction in the monetary value of a fixed asset due to its wear and tear, or obsolescence. It is a method of distributing the cost of the fixed assets over its estimated useful life.

The three methods of depreciation are:

 

  • Straight-line method: Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset.

 

  • Units-of-activity method: In this method of depreciation, the amount of depreciation is charged based on the unit of production each year.
  • Double-declining balance method (Accelerated method): In this method of depreciation, the diminishing value of the asset is taken into consideration for determining the depreciation for the succeeding years.
Step 2

Identify the correct option for the given statement.

In the double declining balance method, the rate of depreciation is the double the amount of the straight line depreciation. In order to determine the declining balance depreciation rate, the annual deprecation under straight line method is multiplied with 2. As...

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Depreciation Accounting

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