What is the main advantage of using the units of production method?
Practice Questions
1 question
Q1
What is the main advantage of using the units of production method?
It simplifies accounting records.
It matches expenses with actual usage.
It provides a higher depreciation expense in early years.
It is easier to calculate than other methods.
The units of production method matches the depreciation expense with the actual usage of the asset, providing a more accurate reflection of its wear and tear.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the main advantage of using the units of production method?
Solution: The units of production method matches the depreciation expense with the actual usage of the asset, providing a more accurate reflection of its wear and tear.
Steps: 5
Step 1: Understand what depreciation is. Depreciation is the process of allocating the cost of an asset over its useful life.
Step 2: Learn about the units of production method. This method calculates depreciation based on how much the asset is used.
Step 3: Recognize that this method ties the depreciation expense directly to the actual usage of the asset.
Step 4: Realize that by matching depreciation with usage, it gives a clearer picture of how much the asset is wearing out.
Step 5: Conclude that the main advantage is that it provides a more accurate reflection of the asset's wear and tear.
