Question

A declining-balance method in which the depreciation rate is calculated as 1.5/N for a service life of N years is known as

a. Straight-line depreciation
b. Double declining balance
c. Sum-of-the-years-digits
d. Units-of-production

Answer 1

The declining-balance method with a depreciation rate of 1.5/N is called the double declining balance method. It results in higher depreciation in the earlier years of an asset's life.

Step-by-step explanation:

A declining-balance method of depreciation in which the depreciation rate is calculated as 1.5/N for a service life of N years is known as the double declining balance method. This method results in higher depreciation expenses in the earlier years of an asset's life. As opposed to the straight-line method which depreciates an asset by the same amount each year, the double declining balance method accelerates the rate of depreciation in the initial years, decelerating as the asset ages. This method is appropriate for assets that quickly lose their value or become obsolete.