California Real Estate Practice Exam

In a straight-line schedule of depreciation, how are the years treated?

1. Each year receives equal weight

2. Earlier years receive more weight

3. Later years receive more weight

4. None of the above

The correct answer is: Each year receives equal weight

The correct understanding here is that in a straight-line schedule of depreciation, each year is treated equally in terms of the amount of depreciation expense allocated. This method spreads the cost of the asset evenly over its useful life, meaning that the same fixed amount is deducted for each year the asset is in use. For example, if an asset costs $10,000 and has a useful life of 10 years, the annual depreciation expense would be $1,000 each year. This consistent treatment allows for straightforward calculations and predictable expense recognition, making it easier for businesses to forecast their financial metrics. The other options suggest varying treatment of years, which does not apply in a straight-line method. In contrast to the straight-line method, other depreciation methods, like declining balance or sum-of-the-years'-digits, weight the earlier years more heavily or apply different rates, but that is not the case here. Thus, the assertion that each year receives equal weight is accurate and aligns with the principles of straight-line depreciation.