Final answer:
The Units of Production method is most appropriate for depreciating assets with seasonal or inconsistent usage as it aligns depreciation with actual use.
Step-by-step explanation:
The correct option is A:
The most suitable method of depreciation for an asset with seasonal or inconsistent benefits is the Units of Production method. they are used or produce less.The Units of Production method allocates depreciation expenses based on the number of units produced or the hours of usage. For example, if a machine is used more during the busy season and less during the off-season, this method accurately reflects the usage and adjusts the depreciation expense accordingly.
An explanation for this choice is that the Units of Production method ties depreciation to the actual use of the asset rather than an arbitrary timeline. This means that in periods where the asset is used more, the depreciation expense will be higher, and in periods of less use, the depreciation expense will be lower. This method matches the expense with the revenue generated from the use of the asset, which is sensible for assets utilized unevenly throughout their lifespan. For example, an ice cream machine that is heavily used during summer months but not in winter would see a higher depreciation expense in the summer when its usage is at its peak.
Key Differences in Other Methods:
- Declining Balance and Double Declining Balance methods accelerate depreciation early in the asset's life, which could be unsuitable for seasonal assets.
- Straight Line depreciation spreads cost evenly over the life of an asset, ignoring fluctuations in usage.