Which of the following statements is not correct with respect to an asset with a five-year life owned by a company that uses straight-line depreciation and the half-year convention?
A)It will have the same depreciation expense in the first and last years.
B)It will be depreciated over six accounting years.
C)It will have a book value that exceeds its salvage value at the end of its economic life.
D)It will have a smaller depreciation expense in Year 4 than it does in Year 2.

Question

Quizplus · Accepted Answer

With straight-line depreciation and the half-year convention, the asset will be depreciated over five and a half years, not six years (so choice B is incorrect). In the first and last years, the depreciation expense will be half of the annual amount (so choice A is correct). Assuming no impairment, the book value of the asset should equal its salvage value at the end of its useful life (so choice C is incorrect). However, the depreciation expense will be the same in Years 2 through 5, but smaller in Year 1 and Year 6 (so choice D is incorrect).

Which of the Following Statements Is Not Correct with Respect