Question

The most common method of depreciation is the diminishing:

a. balance method.
b. capital cost allowance.
c. units-of-activity method.
d. straight-line method.

Answer 1

The most common depreciation method is the straight-line method, which allocates the cost of an asset evenly over its useful life. This method results in a fixed annual depreciation expense as opposed to methods where the expense may vary over time.

Step-by-step explanation:

The most common method of depreciation is the straight-line method. This method spreads the cost of an asset evenly over its useful life. With the straight-line method, the annual depreciation expense is calculated by taking the cost of the asset, subtracting any salvage value, and dividing by the asset's useful life. The result is a fixed amount of depreciation expense recorded each year.

For example, if you purchase a piece of machinery for $10,000 with a salvage value of $1,000 and a useful life of 9 years, the annual depreciation expense would be ($10,000 - $1,000) / 9 = $1,000 per year. This differs from the diminishing balance method, where the depreciation expense decreases over time, and from the units-of-activity method, which allocates the cost based on the asset's usage.