Company a Uses an Accelerated Amortization Method While Company B

question 104

Multiple Choice

Company A uses an accelerated amortization method while Company B uses the straight-line method for an asset of the same cost and useful life.Other things being equal,which of the following is true?

• A)Company A will have higher net income in the early years but Company B will have higher net income towards the end of the asset's useful life.
• B)Company A will consistently have the larger net income until residual value is reached.
• C)Company B will have higher net income in the early years but Company A will have higher net income towards the end of the asset's useful life.
• D)Company B will consistently have the larger net income until residual value is reached.

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Definitions:

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