A benefit of using an accelerated depreciation method is that:Group of answer choicesIt is preferred by the tax code.It yields a higher income in the early years of the asset's useful life.It yields larger depreciation expense in the early years of an asset's life.The results are identical to straight-line depreciation
Question
A benefit of using an accelerated depreciation method is that:Group of answer choicesIt is preferred by the tax code.It yields a higher income in the early years of the asset's useful life.It yields larger depreciation expense in the early years of an asset's life.The results are identical to straight-line depreciation
Solution
The benefit of using an accelerated depreciation method is that it yields larger depreciation expense in the early years of an asset's life.
Here's why:
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Accelerated depreciation methods allow for higher depreciation expense in the first few years of an asset's life and lower depreciation expense in the later years.
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This is beneficial for companies because it reduces their taxable income in the early years of an asset's life.
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This can be particularly useful for assets that lose value quickly. By depreciating the asset more quickly, the company's financial statements more accurately reflect the asset's value over time.
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However, it's important to note that while this method can reduce tax liability in the short term, it may result in higher tax liability in the later years of the asset's life when the depreciation expense is lower.
So, the correct answer is: "It yields larger depreciation expense in the early years of an asset's life."
Similar Questions
An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later yearsGroup of answer choicesTrueFalse
Depreciation is higher in earlier years and income is lower in the later years when using straight-line versus accelerated methodsGroup of answer choicesTrueFalse
Total depreciation expense over an asset's useful life will be identical under all methods of depreciationGroup of answer choicesTrueFalse
The straight-line depreciation method:Multiple Choicereports a higher amount of depreciation expense in the early years of an asset's use.reports an equal amount of depreciation expense each year.can be used only by small companies.reports more depreciation expense in a year when an asset is heavily used and less in a year when the asset is hardly used at all.
At the end of the first year of an asset's life, the declining-balance depreciation method:Multiple Choicecauses an asset to be carried at a higher book value than that computed using the straight-line method.causes an asset to be carried at a lower book value than that computed using the straight-line method.causes an asset to be carried at the same book value as that computed using the straight-line method.cannot be used if the resulting book value will be significantly different from that which would result from using the straight-line method.
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