When comparing the units-of-output method of depreciation with straight-line depreciation:
A) The depreciation expense in the first year will always be greater under units-of-output method.
B) The depreciation expense in the first year will always be less under the units-of-output method.
C) The depreciation expense in the first year will always be the same.
D) The depreciation expense in the first year may be greater than, equal to, or less under the units-of-output method.

Question

Quizplus · Accepted Answer

The units-of-output method calculates depreciation based on the actual usage or production of an asset. Therefore, the depreciation expense in the first year may be greater than, equal to, or less than the straight-line depreciation expense. It will depend on how much the asset is used or produces in that specific year. In contrast, the straight-line method calculates depreciation as a constant percentage of the asset's cost over its useful life, so the depreciation expense will always be the same each year.

When Comparing the Units-Of-Output Method of Depreciation with Straight-Line Depreciation