When a Company Uses Straight-Line Depreciation and the Half-Year Convention

question 5

Multiple Choice

When a company uses straight-line depreciation and the half-year convention, assets with a five-year life:

• A) Will have the same depreciation expense in the first and last years.
• B) Will be depreciated over six accounting years.
• C) Book value will equal its salvage value at the end of its economic life.
• D) All of the above statements are correct.

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Definitions:

Fixed Assets

Assets of a long-lasting nature involved in business operations, which are not anticipated to be expended or turned into cash quickly.

Current Assets

Items of value that are projected to be turned into cash, sold off, or consumed either within a year or throughout the length of the business's normal operational cycle, whichever timeframe is greater.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating its ability to meet short-term obligations.

Office Equipment

Refers to the assets purchased for use in the operation of a business, including computers, printers, and furniture.