A company should choose a depreciation method that
A)best allocates the original cost of the asset to the periods benefited by the use of the asset.
B)saves the most taxes.
C)minimizes net income.
D)shows the highest amount of net income.

Question

Quizplus · Accepted Answer

The primary purpose of depreciation is to allocate the cost of an asset over the periods in which it is expected to provide benefits to the company. Therefore, the best depreciation method is the one that precisely allocates the cost of the asset to the periods benefited by its use. Option A is the only choice that satisfies this requirement. B, C, and D are incorrect because the choice of depreciation method is not about tax savings or minimizing or maximizing net income.

A Company Should Choose a Depreciation Method That