[zhao2vic]

Which depreciation method does not take into consideration of the useful life?
A) Straight-line
B) Double-declining
C) Units of production
D) Sum of years digit
E) No answer
I think the ans should be E although the ans given is C because useful life can be in the form of unit time or unit of output, isn't it?
Thx!:)

[morgaine300]

Useful life is a set number of years. A unit of output isn't the same thing. That's based on actual usage, and you'll depreciate each year based on usage, until your book value reaches the residual value. It doesn't matter how many years it is.

[zhao2vic]

Thx. But my text book stated that the useful life is an estimation of a fixed asset that can be used to provide benefits for a particular period based on years or based on activities on how it's being used. It can be in the form of unit time or unit of ouutput

[morgaine300]

I cannot read that yellow stuff AT ALL. Can you please use quotes, italics, bold, something. Yellow on white is not legible.

[zhao2vic]

Thx. But my text book stated that the useful life is an estimation of a fixed asset that can be used to provide benefits for a particular period based on years or based on activities on how it's being used. It can be in the form of unit time or unit of output.

[morgaine300]

Honestly, I have no idea. It's like they're saying output is its life, which I guess it sort of is, but that's not what we generally mean with the term "useful life" -- we mean years. You could estimate a useful life and still do units. i.e. you think it's 100,000 machine hours and you also think that'll take about 9 years. But you don't actually use the 9 years when figuring the depreciation. Hence, their answer of C. Which sounds like a conflict with what they stated in the text.

To do units of production, you're taking depreciable cost and dividing by estimated output. That gives you a rate per output. Then at year-end, you take the actual output times that rate and that gives you depreciation for the current year. Useful life is nowhere in those equations.

[zhao2vic]

Yea. I'm backing u! Thx!