Which depreciation method yields a constant depreciation expense over the asset's life?

Which depreciation method yields a constant depreciation expense over the asset's life?

• A. Straight-Line Depreciation
• B. Unit of Production
• C. Declining Balance
• D. Sum-of-years' Digits

Answer: (A)

Constant depreciation over an asset’s life comes from spreading the depreciable base evenly across each year of its useful life. That’s exactly what straight-line depreciation does: you take the asset’s cost minus its salvage value (the depreciable base) and divide by the useful life. The annual depreciation is the same every year, assuming no impairment or changes in estimates. For example, if an asset costs 100,000 with a salvage value of 10,000 and a 5-year life, annual depreciation is (100,000 - 10,000) / 5 = 18,000 each year. Other methods don’t produce a constant expense. Unit of Production ties depreciation to actual usage, so the expense varies with how much the asset is used. Declining Balance front-loads depreciation, giving larger expenses in early years that decline over time. Sum-of-years’-Digits is also accelerated, allocating more of the depreciable base to early years and less later on.

Constant depreciation over an asset’s life comes from spreading the depreciable base evenly across each year of its useful life. That’s exactly what straight-line depreciation does: you take the asset’s cost minus its salvage value (the depreciable base) and divide by the useful life. The annual depreciation is the same every year, assuming no impairment or changes in estimates. For example, if an asset costs 100,000 with a salvage value of 10,000 and a 5-year life, annual depreciation is (100,000 - 10,000) / 5 = 18,000 each year.

Other methods don’t produce a constant expense. Unit of Production ties depreciation to actual usage, so the expense varies with how much the asset is used. Declining Balance front-loads depreciation, giving larger expenses in early years that decline over time. Sum-of-years’-Digits is also accelerated, allocating more of the depreciable base to early years and less later on.