Question

Assuming an asset is used evenly over a four-year service life, which method of depreciation will always result in the largest amount of depreciation in the first year?
"Straight-lineUnits-of-productionSum-of-the-years’ digitsDouble-declining balance"

Answer 1

Answer:

Double-declining balance

Explanation:

Double-declining balance deprecation = (2×1/useful life of the asset)) ÷ net book value.

The double declining method always yields the greatest depreciation expense in the first year. The depreciation expense begins to decrease after the first because of the reduction in the net book value of the asset.

The straight line depreciation method = (Cost of asset - Salvage value) / useful life

The straight line depreciation method allocates the same deprecation expense throughout the assets useful life.

Unit of activity method = use of asset during a period × [(cost of asset - Salvage value) / total estimated capacity of asset ]

The depreciation expense using the unit of activity method, depends on the use of the asset during a given period. If the asset was used more in a given period, deprecation expense would be higher. But in the question, the asset was used evenly throughout its useful life, so, the deprecation expense would be the same during its useful life.

I hope my answer helps you.