GAAP says …
Select ONE answer:
- specifies that the straight line method of depreciation must always be used.
- specifies that the reducing balance method of depreciation must always be used.
- allows either the straight line method or the reducing balance method of depreciation to be used provided that only one of them is used in any particular accounting period.
- does not specify that any particular method of depreciation must be used at any time.
Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
- Not correct
- Not correct
- Not correct
- It may be appropriate to use different methods of depreciation for different fixed assets. For example, the reducing balance method may be chosen for cars, as they decline most in value in the early years of their life, and the straight-line method chosen for plant and equipment which is used at a constant rate and which declines in value in proportion to usage. There are also many other methods of depreciation which could be used. Although GAAP does not specify that any particular method of depreciation must be used at any time, once one method is chosen for a particular fixed asset (or category of fixed asset), it should be consistently used for that asset / category.
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