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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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A method that excludes residual value from the depreciation base for the calculation of depreciation is:

  1. a. straight-line
  2. b. sum-of-the-years’-digits
  3. c. double-declining-balance
  4. d. activity

To determine

Identify the correct option for the given statement.

Explanation

Depreciation base: Depreciation base is the amount that is allocated over the estimated service life of the assets. Depreciation base is calculated by deducting the estimated residual value from the cost of an asset. The depreciation base is also known as depreciation cost. The depreciation base is computed as follows:

Depreciation base = Cost of assets Estimated residual value

Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life is referred to as double-declining-balance method

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