How Competitors Calculate Depreciation Is Most Likely to Affect Comparisons

question 1

Multiple Choice

How competitors calculate depreciation is most likely to affect comparisons between competitors if property, plant and equipment:

• A) makes up a large percentage of assets and average useful lives are fairly different.
• B) makes up a small percentage of assets and assets are financed in a different way.
• C) makes up a small percentage of assets and average useful lives are fairly similar.
• D) is primarily leased in the industry, not purchaseD.
• Different accounting methods for depreciation are likely to have a major impact on the comparability of financial ratios among competitors if property, plant, and equipment make up a large portion of total assets and the companies use a varying range of estimated useful lives for buildings and equipment.

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