The Underlying Assumption of the Straight-Line Method of Depreciation Is

question 40

Multiple Choice

The underlying assumption of the straight-line method of depreciation is:

• A) The asset's contribution to income is variable.
• B) The asset makes the same contribution to income each year.
• C) The asset's contribution to income relates mainly to obsolescence.
• D) The asset makes a higher contribution to income in the earlier years of its life.

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Definitions:

Conversion Value

The worth of a convertible security if it were converted into the underlying stock at the current market price.

Convertible Bond

A type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value.

In The Money

A term referring to an option contract that has intrinsic value. For call options, this means the underlying asset price is above the strike price, and for put options, it means the underlying asset price is below the strike price.

Call

A stock market option that gives the holder the right to buy shares at a specified price within a specific time period.