What depreciation method allocates the cost of an asset over time?

• A. Double Declining Balance
• B. Units of Production
• C. Straight Line Depreciation
• D. Accelerated Cost Recovery System

Answer: (C)

The idea is to spread the asset’s cost evenly over its usable life. Straight-line depreciation does this by allocating a constant amount of depreciation each year, based on the depreciable base (cost minus any salvage value) divided by the asset’s useful life. This results in the same depreciation expense in every period, which reflects a steady decline in value as the asset is used. For example, an asset costing 50,000 with a 5,000 salvage value and a 10-year life would have annual depreciation of (50,000 − 5,000) / 10 = 4,500. Other methods don’t do this: double-declining-balance front-loads more expense earlier, units of production ties depreciation to usage, and Accelerated Cost Recovery System is a tax method with varying schedules. Straight-line is the method that allocates the cost evenly over time.