Question

which method of depreciation calculation gives a company an equal tax benefit from one year to the next?

activity - based

straight line

declining balance

salvage

Explanation:

To determine the depreciation method with equal annual tax benefit, we analyze each option:

• Activity - based: Depreciation depends on asset usage (e.g., hours used), so it varies yearly.
• Straight line: Depreciation expense is calculated as $\frac{\text{Cost}-\text{Salvage Value}}{\text{Useful Life}}$, resulting in an equal amount each year. This equal expense leads to equal tax benefits (since depreciation reduces taxable income).
• Declining balance: Depreciation is higher in early years and decreases over time, so tax benefits are not equal.
• Salvage: Salvage value is the asset’s residual value, not a depreciation method.

Answer:

B. Straight line