Which statement about straight-line depreciation is correct?

Which statement about straight-line depreciation is correct?

• A. It accelerates depreciation in early years.
• B. It uses a variable rate tied to asset usage.
• C. It results in depreciation expense that varies irregularly.
• D. It charges the same amount of depreciation each period.

Answer: (D)

Straight-line depreciation spreads the asset’s cost evenly over its useful life. You subtract any salvage value from the cost, divide by the number of periods in the asset’s life, and record the same depreciation amount each period. For example, if a machine costs 50,000, has a 5,000 salvage value, and a 5-year life, annual depreciation is (50,000 - 5,000) / 5 = 9,000 per year. This results in a constant expense every year, which helps with budgeting and planning. Other descriptions don’t fit straight-line. A method that accelerates depreciation in early years front-loads expense. A rate tied to asset usage produces depreciation that varies with how much the asset is used. And depreciation that varies irregularly isn’t consistent with the fixed annual amount produced by straight-line.

Straight-line depreciation spreads the asset’s cost evenly over its useful life. You subtract any salvage value from the cost, divide by the number of periods in the asset’s life, and record the same depreciation amount each period. For example, if a machine costs 50,000, has a 5,000 salvage value, and a 5-year life, annual depreciation is (50,000 - 5,000) / 5 = 9,000 per year. This results in a constant expense every year, which helps with budgeting and planning.

Other descriptions don’t fit straight-line. A method that accelerates depreciation in early years front-loads expense. A rate tied to asset usage produces depreciation that varies with how much the asset is used. And depreciation that varies irregularly isn’t consistent with the fixed annual amount produced by straight-line.