Question

Which statement is true about the straight-line method of depreciation? It recognizes expense proportionately with the amount of use of the asset. It is the preferred method for companies expecting to use the asset more in its early years of life. It allocates an equal amount of depreciation to each year of the asset's service life. It is an accelerated method of depreciation.

Answer 1

The statement that "It allocates an equal amount of depreciation to each year of the asset's service life" is true.

Step-by-step explanation:

Depreciation expense is the systematic allocation of the cost of an assets over the estimated useful life of the asset. The depreciation expense can be charged on an asset using various methods. One of the most common methods is to use the straight line method of depreciation.

The straight line method charges a constant depreciation expense through out the useful life of the asset. This means that regardless of the use of the asset in each year, the straight line method charges the same depreciation expense every year.

The formula for depreciation expense under this method is,

Depreciation expense = (Cost - Residual value) / Estimated useful life of the asset

Thus, the statement that "It allocates an equal amount of depreciation to each year of the asset's service life" is true about the straight line method of depreciation.