Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 9 - Reporting and Analyzing Long-Lived Assets - Questions: 8

Answer

(a) Straight line method of depreciation divides the depreciable cost in useful life of the assets. Every year the depreciation expense will remain at the same amount. (b) The pattern of depreciation in case of straight line method will be of a fixed amount.

Work Step by Step

(a) However, in case of units-of-activity method, the depreciable cost is divided in useful units of activity during the life of the asset. The depreciation expense for the year will vary as per the actual units of activity. (b) Every year, the same amount will be charged as depreciation expense. In case of Units-of-activity, the pattern of depreciation will depend on the actual activity of the asset and the depreciation expense will vary every year.
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