Which of the following best describes straight-line depreciation?

Which of the following best describes straight-line depreciation?

• A. Applies a decreasing amount each year
• B. Allocates a consistent amount every year
• C. Increases the depreciation expense annually
• D. Is used for land and intangible assets

Answer: (B)

Straight-line depreciation is a method used to allocate the cost of a tangible asset evenly across its useful life. This approach fundamentally operates on the principle that the asset will provide equal utility over each period of its estimated lifespan. By calculating straight-line depreciation, businesses recognize the same amount of depreciation expense in each accounting period until the asset's value is fully depreciated, or reaches its salvage value. This method is widely adopted due to its simplicity and ease of calculation, making it an attractive option for many companies. It ensures that the expense is consistent, enabling effective financial planning and analysis since it allows for predictable expense recognition. In contrast, the other options imply varying expense recognition or misapplication of the method, such as decreasing amounts or annual increases in depreciation, which do not align with the straight-line approach. Additionally, straight-line depreciation is specifically applicable to tangible assets rather than intangible assets, with land generally not being depreciated at all due to its indefinite life.

Straight-line depreciation is a method used to allocate the cost of a tangible asset evenly across its useful life. This approach fundamentally operates on the principle that the asset will provide equal utility over each period of its estimated lifespan. By calculating straight-line depreciation, businesses recognize the same amount of depreciation expense in each accounting period until the asset's value is fully depreciated, or reaches its salvage value.

This method is widely adopted due to its simplicity and ease of calculation, making it an attractive option for many companies. It ensures that the expense is consistent, enabling effective financial planning and analysis since it allows for predictable expense recognition.

In contrast, the other options imply varying expense recognition or misapplication of the method, such as decreasing amounts or annual increases in depreciation, which do not align with the straight-line approach. Additionally, straight-line depreciation is specifically applicable to tangible assets rather than intangible assets, with land generally not being depreciated at all due to its indefinite life.