The correct option is C. Straight-Line Method. Explanation of the Correct Answer The Straight-Line Method of depreciation is the most straightforward and commonly used method for allocating the cost of an asset over its useful life. Here’s how it works:

1. Definition: The Straight-Line Method spreads the cost of an asset evenly across its useful life. This means that the same amount of depreciation expense is recorded in each accounting period until the asset is fully depreciated.
2. Calculation: To calculate the annual depreciation expense using the Straight-Line Method, you can use the following formula:

[ \text{Annual Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life}} ]

• Cost of Asset: The initial purchase price of the asset.
• Salvage Value: The estimated residual value of the asset at the end of its useful life.
• Useful Life: The period over which the asset is expected to be used.

For example, if a company purchases a machine for $10,000, expects it to have a salvage value of $1,000, and estimates its useful life to be 5 years, the annual depreciation expense would be calculated as follows: [ \text{Annual Depreciation Expense} = \frac{10,000 - 1,000}{5} = \frac{9,000}{5} = 1,800 ] Thus, the company would record $1,800 as depreciation expense each year for 5 years. Explanation of Why Other Options Are Incorrect Now, let’s look at why the other options are not correct: A. Declining Balance Method: - This method allocates a higher depreciation expense in the earlier years of an asset's life and decreases over time. It uses a fixed percentage of the book value of the asset at the beginning of each year, which means the expense is not equal each period. Therefore, this method does not meet the criteria of allocating an equal amount of depreciation expense. B. Units of Production Method: - This method bases depreciation on the actual usage of the asset rather than time. The expense varies depending on how much the asset is used in a given period. For example, if a machine is used more in one year than another, the depreciation expense will be higher in that year. This method does not allocate an equal amount of depreciation expense each period. D. Sum-of-the-Years'-Digits Method: - This is an accelerated depreciation method that results in higher depreciation expenses in the earlier years and lower expenses in the later years. The formula involves summing the digits of the years of the asset's useful life and applying a fraction to the depreciable base. Like the Declining Balance Method, it does not allocate an equal amount of depreciation expense. Common Pitfalls

• Confusing Methods: Students often confuse the Straight-Line Method with accelerated methods like Declining Balance or Sum-of-the-Years'-Digits. Remember, the key feature of the Straight-Line Method is the equal allocation of expense.
• Miscalculating Useful Life or Salvage Value: Ensure that both the useful life and salvage value are estimated accurately, as they directly affect the annual depreciation expense.

Revision Summary

• The Straight-Line Method allocates an equal amount of depreciation expense each period.
• Use the formula: (\text{Annual Depreciation Expense} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}).
• Other methods (Declining Balance, Units of Production, Sum-of-the-Years'-Digits) do not allocate equal expenses.
• Be careful with definitions and calculations to avoid common pitfalls.