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Under which depreciation method the amount of depreciation expenses remain same throughout the useful life of a fixed asset
- a)Straight line method
- b)Number of units produced method
- c)Reducing balance method
- d)Machine hour method
Correct answer is option 'A'. Can you explain this answer?
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Under which depreciation method the amount of depreciation expenses re...
Under which depreciation method the amount of depreciation expenses remain same throughout the useful life of a fixed asset?
The correct answer is Straight line method.
Explanation:
The straight line method is a common and simple depreciation method used to allocate the cost of a fixed asset evenly over its useful life. In this method, the amount of depreciation expense remains the same throughout the useful life of the asset.
Here are some key points about the straight line method:
- The straight line method is based on the assumption that the asset depreciates by an equal amount each year.
- The formula to calculate the annual depreciation under the straight line method is:
- Depreciation Expense = (Cost of Asset - Salvage Value) / Useful Life
- The cost of the asset is the initial purchase price or the historical cost.
- The salvage value is the estimated value of the asset at the end of its useful life.
- The useful life is the estimated number of years that the asset will be productive and generate economic benefits.
- The depreciation expense is the amount that is recorded as an expense on the income statement each year to reflect the reduction in the value of the asset.
- By using the straight line method, the same amount of depreciation expense is recognized each year, resulting in a consistent allocation of the asset's cost over its useful life.
Therefore, the straight line method is the depreciation method where the amount of depreciation expenses remains the same throughout the useful life of a fixed asset.
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Under which depreciation method the amount of depreciation expenses re...
Straight line method
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Under which depreciation method the amount of depreciation expenses remain same throughout the useful life of a fixed asseta)Straight line methodb)Number of units produced methodc)Reducing balance methodd)Machine hour methodCorrect answer is option 'A'. Can you explain this answer?
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