Straight-line depreciation vs double-declining-balance: which statement is true?

Straight-line depreciation vs double-declining-balance: which statement is true?

• A. Straight-line accelerates expense early; DDB spreads it evenly.
• B. Straight-line allocates equal expense; DDB accelerates early.
• C. DDB results in higher book value earlier.
• D. Both methods have identical expense patterns.

Answer: (B)

Depreciation methods allocate asset cost over time in different ways. Straight-line depreciation spreads the same amount of expense each period, so the book value falls by a constant amount every year. Double-declining-balance is an accelerated method: you apply a rate that’s double the straight-line rate to the beginning-of-period book value, producing a larger depreciation expense in the early years and smaller expenses later. Because of this, the early years see a faster drop in book value under DDB compared with straight-line. So the true statement is that straight-line allocates equal expense across periods while DDB accelerates depreciation to earlier periods. The other options describe the opposite or claim identical patterns, which isn’t correct.

Depreciation methods allocate asset cost over time in different ways. Straight-line depreciation spreads the same amount of expense each period, so the book value falls by a constant amount every year. Double-declining-balance is an accelerated method: you apply a rate that’s double the straight-line rate to the beginning-of-period book value, producing a larger depreciation expense in the early years and smaller expenses later. Because of this, the early years see a faster drop in book value under DDB compared with straight-line.

So the true statement is that straight-line allocates equal expense across periods while DDB accelerates depreciation to earlier periods. The other options describe the opposite or claim identical patterns, which isn’t correct.