Which of the following statements is false? (When DB and switching DB are compar

Question

Which of the following statements is false? (When DB and switching DB are compared, assume that they have the same n and alpha parameters. Assume that SL depreciation has zero salvage value.)

A) Double-declining balance switching to straight-line depreciation defines a book value at the end of the recovery period that is greater than that of straight-line depreciation.

B) Double-declining balance switching to straight-line depreciation defines a lesser book value at the end of the recovery period than double-declining balance depreciation.

C) Double-declining balance switching to straight-line depreciation defines a lesser amount of depreciation in the final year than straight-line depreciation.

D) Double-declining balance switching to straight-line depreciation defines an equal amount of depreciation in the first year when compared to double-declining balance depreciation.

Explanation / Answer

In stright line method depreciation expenses is equal for each year over the life of assets but in Double-declining balance depreciation expenses is higher in initial period of life and later it get reduced. So, Double-declining balance switching to straight-line depreciation defines a lesser amount of depreciation in the final year than straight-line depreciation.

Option (C) is correct answer.

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