MC Qu. 138 Why can depreciation expense be a Why can depreciation expense be a d
ID: 2508245 • Letter: M
Question
MC Qu. 138 Why can depreciation expense be a Why can depreciation expense be a different amount each year using the units-of-production method? O The method calculates expense based on the relationship between each year's output and total estimated output O The method calculates expense based on cost divided by the expected useful life. O The units-of-production method is an accelerated depreciation method. O The units-of-production method is based on the difference in the appraisal value of the asset from one year to the next.Explanation / Answer
Answer is first option i.e the method calculates expense based on relationship between each year output and total estimated output because higher depreciation is charged when there is higher activity and lower depreciation is charged when there is lower activity and no depreciation is charged when asset is idle for the whole period. Such method is useful when company has many assets with varing usage.
Formula =
[(Original cost-Salvage Value)/estimated production capability]* units produced that year
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.