Which method allocates depreciation evenly over the useful life of an asset?

Which method allocates depreciation evenly over the useful life of an asset?

• A. Reducing-balance method
• B. Straight-line method
• C. Aging method
• D. Accelerated depreciation

Answer: (B)

The straight-line method allocates depreciation evenly over the useful life of an asset, making it a widely used approach in accounting for fixed assets. This method involves taking the initial cost of the asset minus its estimated salvage value, and then dividing this amount by the asset's useful life in years. As a result, the same amount of depreciation expense is recognized each accounting period, providing a consistent and easily understandable impact on the financial statements. This is particularly beneficial for budgeting and forecasting, as it allows businesses to predict their expenses accurately over the years the asset is in use. In contrast, the reducing-balance method applies a fixed percentage to the remaining book value of the asset each year, leading to higher depreciation expense in the early years and decreasing amounts in later years. The aging method is not a standard depreciation technique but rather a way to evaluate an asset’s value based on its age and condition, and accelerated depreciation methods front-load costs, resulting in larger expenses in earlier years.

The straight-line method allocates depreciation evenly over the useful life of an asset, making it a widely used approach in accounting for fixed assets. This method involves taking the initial cost of the asset minus its estimated salvage value, and then dividing this amount by the asset's useful life in years. As a result, the same amount of depreciation expense is recognized each accounting period, providing a consistent and easily understandable impact on the financial statements. This is particularly beneficial for budgeting and forecasting, as it allows businesses to predict their expenses accurately over the years the asset is in use.

In contrast, the reducing-balance method applies a fixed percentage to the remaining book value of the asset each year, leading to higher depreciation expense in the early years and decreasing amounts in later years. The aging method is not a standard depreciation technique but rather a way to evaluate an asset’s value based on its age and condition, and accelerated depreciation methods front-load costs, resulting in larger expenses in earlier years.