What is the primary characteristic of the Declining Balance Method?
Practice Questions
1 question
Q1
What is the primary characteristic of the Declining Balance Method?
Depreciation expense decreases over time
Depreciation expense remains constant
Depreciation expense increases over time
Depreciation is based on units produced
The Declining Balance Method results in higher depreciation expenses in the earlier years, which decreases over time.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the primary characteristic of the Declining Balance Method?
Solution: The Declining Balance Method results in higher depreciation expenses in the earlier years, which decreases over time.
Steps: 5
Step 1: Understand that the Declining Balance Method is a way to calculate depreciation, which is how we spread the cost of an asset over its useful life.
Step 2: Know that in this method, we take a fixed percentage of the asset's remaining value each year.
Step 3: Realize that because we are using the remaining value, the amount we depreciate is higher in the first few years.
Step 4: Observe that as the asset gets older, its remaining value decreases, leading to lower depreciation expenses in later years.
Step 5: Conclude that the primary characteristic of this method is that it results in higher depreciation expenses at the beginning and lower expenses as time goes on.
