(CMA adapted, Jun 90 #27) When a fixed plant asset with a five-year estimated useful life is sold during the second year, how would the use of a double declining balance method of depreciation instead of the straight-line method affect the gain or loss on the sale of the fixed plant asset? $\begin{array}{|l|l|}
\hline \text { Gain } & \text { Loss } \
\hline
\end{array}$
A)Increase Increase
B)Increase Decrease
C)Decrease Increase
D)Decrease Decrease
E)cannot be determined by the information provided.

Question

Quizplus · Accepted Answer

The double declining balance method results in higher depreciation expense in the early years of an asset's life compared to the straight-line method. Therefore, if an asset is sold in the second year, its book value would be lower under the double declining balance method, leading to a higher gain (or smaller loss) on sale compared to using the straight-line method.

(CMA Adapted, Jun 90 #27) When a Fixed Plant Asset Gain Loss \begin{array}{|l|l|}\hline \text { Gain } & \text { Loss } \\\hline\end{array} Gain ​ Loss ​​

(CMA Adapted, Jun 90 #27) When a Fixed Plant Asset $\begin{array}{|l|l|}\hline \text { Gain } & \text { Loss } \\\hline\end{array}$