Question

Which of the following statements accurately describes composite or group depreciation?

A. With composite or group depreciation, the years of useful life of the various assets in the group are added together, then the total is divided by the number of items.
B. With composite or group depreciation, the cost of the individual units within an asset group is charged to expense in the year a unit is retired from service.
C. With composite or group depreciation, a straight-line rate is computed by dividing the total of the annual depreciation expense for all assets in the group by the total cost of the assets.
D. With composite or group depreciation, the original cost of all items in a given group or class of assets is retained in the asset account, and the cost of replacements is charged to expense when they are acquired.

Answer 1

Composite or group depreciation is described by calculating a straight-line rate based on the total annual depreciation expense over the total cost of the group's assets.

Step-by-step explanation:

The statement that accurately describes composite or group depreciation is C. With composite or group depreciation, a straight-line rate is computed by dividing the total of the annual depreciation expense for all assets in the group by the total cost of the assets. This method allows for a more straightforward calculation where assets with different lives are depreciated as a single group or pool without allocating the cost to individual assets. The annual depreciation expense is applied uniformly, which offers convenience and simplifies accounting practices.