Question

When an accelerated depreciation method is used to calculate depreciation expense: Multiple Choice the accumulated depreciation account balance will increase by a larger amount in the last half of an asset's life than if straight-line depreciation is used. the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used. the net book value of the asset at the end of its useful life will be less than if straight-line depreciation is used. depreciation expense will be less in the early years of the asset's life than if straight-line depreciation is used.

Answer 1

the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used.

Step-by-step explanation:

Let me use an example to illustrate this.

An asset has a useful life of 4 years. It costs $1000. It has a salvage value of 0

If the straight line depreciation method is used , the depreciation expense every year = $1000/ 4 = $250

The net book value halfway through its useful life = $1000 - ($250 x 2) = $500

If double declining method is used, the depreciation expense in the first year would be = 2/4 x $1000 = $500

The net book value at the beginning of year 2 = $1000 - $500 = $500

Depreciation expense in year 2 = 2/4 x $500 = $250

The net book value at the beginning of year 3 = $500 - $250 = $250

We can see that the net book value halfway through the useful is lower when double declining depreciation method is used