Each of the statements appearing below is descriptive of one or more of the foll

Question

Each of the statements appearing below is descriptive of one or more of the following depreciation methods. Create a list numbered 1 – 5 and place the Roman Numeral(s) belonging to the method(s) to which the statement best applies. A method could be used once, more than once or not at all.

I.    Component                            

II.   Declining-balance                  

III. Straight-line

IV. Sum-of-the-years'-digits

V.   Units-of-production

____111_ 1.   The depreciation charged by this method decreases by the same amount each year.

_____ 2.   This method is used if each part of a plant asset is significant to the asset's total cost.

_____ 3.   The method allocates larger shares of the cost of a plant asset to expense during the years in which the greatest use is made of the asset.

_____ 4.   The method always allocates larger shares of the cost of a plant asset to expense during the earlier years of its life.

_____ 5.   Once the depreciable base, residual value, and life of a plant asset are determined, the annual charges to operations under this method will be the same.

Explanation / Answer

1.   The depreciation charged by this method decreases by the same amount each year .IV. Sum-of-the-years'-digits.

2.   This method is used if each part of a plant asset is significant to the asset's total cost. I.Component

3.   The method allocates larger shares of the cost of a plant asset to expense during the years in which the greatest use is made of the asset. V. Units-of-production

4.   The method always allocates larger shares of the cost of a plant asset to expense during the earlier years of its life. II.Declining-balance &  IV. Sum-of-the-years'-digits.

5.  Once the depreciable base, residual value, and life of a plant asset are determined, the annual charges to operations under this method will be the same. III. Straight-line

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