- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 6. Depreciation Methods
CFA Practice Question
Which depreciation method bases depreciation expense for a given period on actual use?
B. Double-declining-balance method
C. Units-of-production method
A. Straight-line method
B. Double-declining-balance method
C. Units-of-production method
Correct Answer: C
The units-of-production method bases depreciation expense on actual use rather than on the amount of time the company used the asset.
User Contributed Comments 2
| User | Comment |
|---|---|
| kalps | Sum of the years = Cost - salvage X n/x where n is the year starting from 1 and n is the total number of years i.e. less depn in first few years than during the end |
| anricus | Kalps, should be more depreciation in the earlier years not less... refer to notes! This reflects economic reality where assets lose more of their value in the earlier years! |