A Fixed Asset with a Five-Year Estimated Useful Life and No

question 23

Multiple Choice

A fixed asset with a five-year estimated useful life and no scrap value is sold at the end of the second year of its useful life. How would using the straight-line method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset?

• A) A gain would be greater or a loss would be less using straight-line depreciation.
• B) A gain would be less or a loss would be greater using straight-line depreciation.
• C) A gain would be less or a loss would be less using straight-line depreciation.
• D) Neither the gain or loss would be different using straight-line depreciation instead of double-declining-balance method.

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Definitions:

Continuous Uniform Probability Distribution

A type of probability distribution where all outcomes in a continuous range are equally likely.

Rectangular

Pertaining to a shape or object whose surface has four right angles and the opposite sides are parallel and equal in length.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values; quantifies the degree to which values differ from the average value.

Normal Distribution

A bell-shaped curve that represents the distribution of data around a mean, showing that data near the mean are more frequent in occurrence.