Arizona State University (ASU) ACC231 Uses of Accounting Information I Exam 3 Practice

The choice of Double-Declining-Balance Depreciation is correct because this method applies a constant rate of depreciation against the declining book value of the asset each year. It accelerates depreciation compared to other methods, resulting in larger expense amounts in the earlier years of an asset's life.

Specifically, the double-declining balance method doubles the straight-line depreciation rate, which means a higher percentage of the asset's cost is allocated as an expense during the initial years. As the asset ages, the expense decreases because the depreciation is based on the remaining book value, which diminishes each year. This approach is particularly useful for assets that tend to lose value more rapidly in the early years of use.

In contrast, the Straight-Line method spreads the cost of the asset evenly over its useful life, resulting in consistent and smaller depreciation expenses each year. The Units-of-Production method bases the expense on actual usage, which might vary from year to year but does not inherently favor larger deductions in the early years. The Sum-of-the-Years'-Digits method also leads to higher depreciation in the earlier years but not to the same extent as the Double-Declining-Balance method.