Which depreciation methods are commonly used?

• A. Straight-line
• B. Double-declining balance
• C. Units-of-production
• D. All of the above

Answer: (D)

Depreciation can be recognized using several methods, each reflecting how an asset’s value is consumed over time. Straight-line depreciation spreads the cost evenly over the asset’s useful life, so the expense is the same each year—this works well when the asset’s wear and benefit are relatively constant. The double-declining balance method is an accelerated approach that charges more depreciation in the early years and less later, which is useful when the asset provides more value or wears out faster at the beginning of its life. Units-of-production ties depreciation to actual usage—expense varies with how much the asset is used, which is ideal for machinery or vehicles where wear depends on activity.

Because different assets and situations call for different patterns of expense recognition, all of these methods are commonly used in practice.