Question

When using which depreciation method do you disregard the residual value when computing deprecaiton expense for the first year of the asset's life?

Multiple Choice

• Straight-line

• Units of production

• Declining balance

• None of the above

Answer 1

Under Declining balance method, residual value is disregarded when computing deprecaiton expense for the first year of the asset's life.

Third option is correct.

Under Declining balance method, deprecaiton expense for the first year of the asset's life, is calculated by multiplying the cost of the asset with the declining depreciation rate.

While calculating depreciation expense under Straight-line and Units of production method, residual value is subtracted from the cost of the asset to calculate depreciable cost of the asset.