Which method of depreciation allocates the cost of an asset evenly over its useful life?

• A. Straight-line depreciation
• B. Accelerated depreciation
• C. Declining balance depreciation
• D. Units of production depreciation

Answer: (A)

When you want to allocate the cost evenly over the asset’s useful life, you use straight-line depreciation. This method spreads the expense in equal amounts each year by subtracting a planned salvage value from the asset’s cost and dividing that amount by the asset’s useful life. The result is a consistent depreciation expense year after year, and the asset’s book value declines at a steady rate until it reaches its salvage value. Other methods change the timing of when depreciation is recognized: accelerated approaches take more expense in the early years, and units of production ties expense to actual usage, so wear varies with how much the asset is used. Straight-line is the simple, uniform approach.