Assume that two companies are in similar circumstances except for their choice of depreciation methods. Explain how the amounts of depreciation expense reported on the income statement of the company that uses the straight-line method will differ from the amounts reported by the company that uses the double-declining-balance method.

What will be an ideal response?


Answers will vary.
During the early years of the asset's life, the straight-line method will report lower depreciation expense (and higher net income) than the double-declining-balance method. During the later years of the asset's life, the straight-line method will report higher depreciation expense (and lower net income) than the double-declining-balance method.

Business

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