PSIA Accounting Practice Test

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

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

Correct Answer:

Straight-line allocates equal expense; DDB accelerates early.

Explanation:

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 SAMPLEdepreciation to earlier periods. The other options describe the opposite or claim identical patterns, which isn’t correct.

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