The straight-line depreciation method:
- Reports an equal amount of depreciation expense each year.
- Reports a higher amount of depreciation expense in the early years of an asset's use.
- Reports more depreciation expense in a year when an asset is heavily used and less in a when the asset is hardly used at all.
- Can be used only by small companies.
Depreciation can be charged through various methods. Some of methods for charging depreciation are straight line depreciation, written down value method, double declining method etc. Each method is different from each other and suit different businesses. Management should select appropriate method as per their needs.
Answer and Explanation:
The correct option is reports an equal amount of depreciation expense each year.
Straight line of depreciation is one of the method of charging depreciation in the books of accounts. Under this method, the depreciable value of an asset is evenly distributed over its useful life. Depreciation expenses for every year remains same. This method is called straight line method because when depreciation expenses would be plotted in a graph, it would be a straight line.
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fromChapter 5 / Lesson 14
As property wears out, it loses some of its value, which is called depreciation. In this lesson, we will learn three of the most common methods of calculating depreciation expense, including the straight-line method.