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In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?
- a)Straight line method
- b)Written down value method
- c)Units-of-production method
- d)Sum-of-the-years’-digits method
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
In which of the following methods, is the cost of the asset written of...
Straight Line Method
The straight-line method is a common method of calculating depreciation expense. In this method, the cost of the asset is written off in equal proportion during its useful economic life. This means that the same amount of depreciation expense is recognized each year over the useful life of the asset.
Calculation of Depreciation Expense
The calculation of depreciation expense using the straight-line method is as follows:
Depreciation Expense = (Cost of Asset – Salvage Value) / Useful Life
Where:
- Cost of Asset: The cost of the asset is the amount paid to acquire the asset, including any additional costs incurred to bring the asset into service.
- Salvage Value: The salvage value is the estimated value of the asset at the end of its useful life.
- Useful Life: The useful life is the estimated period over which the asset is expected to provide economic benefits.
Advantages of Straight Line Method
The straight-line method has several advantages:
- Easy to understand and calculate
- Provides a more accurate representation of the asset's economic benefits over time
- Provides a consistent amount of depreciation expense each year, making it easier to plan and budget
Disadvantages of Straight Line Method
The straight-line method also has some disadvantages:
- Does not take into account the actual usage of the asset
- Does not take into account the effects of inflation
- Can result in over or under depreciation of the asset if the estimated useful life or salvage value is incorrect.
Conclusion
In conclusion, the straight-line method is a simple and effective method of calculating depreciation expense. It is widely used by companies because of its ease of use and consistency. However, it is important to remember that it has some limitations and may not be suitable for all types of assets. Therefore, it is important to consider other methods of depreciation as well.
The straight-line method is a common method of calculating depreciation expense. In this method, the cost of the asset is written off in equal proportion during its useful economic life. This means that the same amount of depreciation expense is recognized each year over the useful life of the asset.
Calculation of Depreciation Expense
The calculation of depreciation expense using the straight-line method is as follows:
Depreciation Expense = (Cost of Asset – Salvage Value) / Useful Life
Where:
- Cost of Asset: The cost of the asset is the amount paid to acquire the asset, including any additional costs incurred to bring the asset into service.
- Salvage Value: The salvage value is the estimated value of the asset at the end of its useful life.
- Useful Life: The useful life is the estimated period over which the asset is expected to provide economic benefits.
Advantages of Straight Line Method
The straight-line method has several advantages:
- Easy to understand and calculate
- Provides a more accurate representation of the asset's economic benefits over time
- Provides a consistent amount of depreciation expense each year, making it easier to plan and budget
Disadvantages of Straight Line Method
The straight-line method also has some disadvantages:
- Does not take into account the actual usage of the asset
- Does not take into account the effects of inflation
- Can result in over or under depreciation of the asset if the estimated useful life or salvage value is incorrect.
Conclusion
In conclusion, the straight-line method is a simple and effective method of calculating depreciation expense. It is widely used by companies because of its ease of use and consistency. However, it is important to remember that it has some limitations and may not be suitable for all types of assets. Therefore, it is important to consider other methods of depreciation as well.
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In which of the following methods, is the cost of the asset written of...
The Straight Line Method of depreciation is a method where the cost of an asset is written off in equal annual amounts over its useful economic life. This means that the same amount of depreciation is charged each year, which provides a consistent and straightforward way to allocate the cost of the asset over time.
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In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer?
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In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer?.
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In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of In which of the following methods, is the cost of the asset written off in equal proportion, during its useful economic life?a)Straight line methodb)Written down value methodc)Units-of-production methodd)Sum-of-the-years’-digits methodCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
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