All of the Following Statements Are True Regarding the Declining-Balance

question 2

Multiple Choice

All of the following statements are true regarding the declining-balance method of depreciation except

• A) the declining-balance method ignores salvage value when calculating depreciation.
• B) the declining-balance method produces lower depreciation expense in the early years as opposed to the later years.
• C) the declining-balance method is compatible with the matching principle.
• D) the declining-balance method is appropriate when assets lose their usefulness rapidly.

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Definitions:

Operating Cycle

The period between the acquisition of inventory and the collection of cash from receivables, indicating the efficiency of a company's operations.

Inventory Period

The duration of time goods remain in inventory before being sold.

Accounts Receivable Period

The accounts receivable period is the average time it takes for a business to receive payments owed by its customers for goods or services sold on credit.

Cash Cycle

This term describes the time it takes for a business to convert its investments in inventory and other resources into cash flows from sales.