Question

Select all that apply

Which of the following are commonly used depreciation methods?
a. Declining-balance
b. Activity-based
c. Value-based
d. Straight-line
e. Increasing-balance

Answer 1

The commonly used depreciation methods are straight-line, declining-balance, and increasing-balance. Straight-line depreciation spreads the cost of an asset equally over its useful life, while declining-balance and increasing-balance depreciation methods allow for larger or smaller expenses in the early years, gradually decreasing or increasing over time.

Step-by-step explanation:

The commonly used depreciation methods are: Straight-line, Declining-balance, and Increasing-balance. Let's briefly explain each of these methods:

1. Straight-line depreciation: This method spreads the cost of an asset equally over its useful life. It is the simplest and most commonly used method.
2. Declining-balance depreciation: This method allows for larger depreciation expenses in the early years of an asset's useful life, gradually decreasing over time.
3. Increasing-balance depreciation: This method is less commonly used and allows for smaller depreciation expenses in the early years, gradually increasing over time.

Methods such as declining-balance and straight-line are frequently employed in various businesses to reflect the consumption of an asset's useful life over time. The straight-line method spreads the cost evenly over the asset's life, while declining-balance accelerates depreciation at a higher rate in the early years. The activity-based method depreciates assets based on usage rather than time.

The options 'c. Value-based' and 'e. Increasing-balance' are not standard depreciation methods.