Compared to straight-line depreciation, reducing-balance depreciation:
A) results in lower net profit in earlier years and higher net profit in later years.
B) is used more often on the statement of comprehensive income than is the straight-line method.
C) leads to higher book values for depreciable assets than does the straight-line method.
D) allocates larger portions of cost to later periods than to earlier ones.

Question

Quizplus · Accepted Answer

Reducing-balance depreciation charges a higher depreciation expense in the earlier years of an asset's life and lower expenses in the later years. This results in lower net profits in the early years and higher net profits in the later years, compared to the straight-line method which spreads the cost evenly over the asset's useful life.

Compared to Straight-Line Depreciation, Reducing-Balance Depreciation