Question

When using the activity method, depreciation is treated as

A. a function of neither the passage of time nor productivity.
B. a function of productivity but not the passage of time.
C. a function of both productivity and the passage of time.
D. a function of the passage of time but not productivity

Answer 1

Depreciation is treated as a function of productivity but not the passage of time when using the activity method.

Step-by-step explanation:

When using the activity method, depreciation is treated as B. a function of productivity but not the passage of time. The activity method, sometimes referred to as the units of production method, calculates depreciation based on the actual use of the asset rather than the passage of time.

This method is more reflective of the wear and tear on the asset which is a result of productivity rather than time.