Question

A company uses a method that results in high depreciation expense initially and lower in later years. This pattern benefits them because:

Options

• It shows lower profits when the asset’s productivity is high

• It evens out profit each year

• It increases asset value every year

• It reduces tax burden when the asset is near end of life

Answer 1

It shows lower profits when the asset’s productivity is high

Explanation:

Methods like Double Declining Balance or SYD charge higher depreciation early, matching high productivity with higher expense, ensuring fair profit distribution across the asset’s life.