A Principal Objection to the Straight-Line Method of Depreciation Is

question 100

Multiple Choice

A principal objection to the straight-line method of depreciation is that it

• A) provides for the declining productivity of an aging asset.
• B) ignores variations in the rate of asset use.
• C) tends to result in a constant rate of return on a diminishing investment base.
• D) gives smaller periodic write-offs than decreasing charge methods.

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Definitions:

Direct Method

An accounting method used to prepare the cash flow statement, which shows actual cash inflows and outflows from operating activities.

Operating Expenses

Expenditures that a business incurs through its normal business operations, such as rent, utilities, and salaries, excluding production costs.

Accounts Receivable

Receivables from clients for services or goods delivered by a company but not yet compensated.

Accounts Payable

Money owed by a business to its suppliers shown as a liability on the company's balance sheet.