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Basic Question 18 of 19
Which of the following statements is the LEAST ACCURATE regarding accelerated depreciation methods?
B. Accelerated depreciation compensates for rising repair costs as an asset ages.
C. Accelerated depreciation methods are appropriate if the benefits from using an asset are highest when it is relatively new.
D. Accelerated depreciation methods are often used to reduce the tax burden immediately after an asset is purchased.
A. Accelerated depreciation methods depreciate an asset in proportion to its actual use.
B. Accelerated depreciation compensates for rising repair costs as an asset ages.
C. Accelerated depreciation methods are appropriate if the benefits from using an asset are highest when it is relatively new.
D. Accelerated depreciation methods are often used to reduce the tax burden immediately after an asset is purchased.
User Contributed Comments 5
| User | Comment |
|---|---|
| cfairs | Why is B true for accelerated depreciation? |
| dravinskis | cfairs, I think it's because the depreciation expense will be lower in later years so when added to repair expenses, the combined effect would be less than if straight-line was used. |
| Thediceman | I don't understand B neither. With advanced depreciation method, it will be less in the later year, how could this compensate the rising repair cost. So i think it is least accreted. |
| charliez | Thediceman: it just means less depreciation cost but more repair cost, which makes the total cost of maintaining an asset about the same. |
| farhan92 | dont be rebel - follow the instructions that are capitalised! |
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Learning Outcome Statements
analyze and interpret financial statement disclosures regarding property, plant, and equipment and intangible assets
CFA® 2024 Level I Curriculum, Volume 2, Module 7.