Correct Option: B. Double declining balance depreciation Explanation of the Correct Answer The double declining balance (DDB) method of depreciation is an accelerated depreciation method. This means that it allocates a larger portion of the asset's cost as an expense in the earlier years of the asset's life compared to later years. Here’s how it works:

1. Understanding the DDB Method:
2. The formula for calculating depreciation using the double declining balance method is: [ \text{Depreciation Expense} = \text{Book Value at Beginning of Year} \times \left(\frac{2}{\text{Useful Life}}\right) ]
3. The "2" in the formula indicates that we are using double the straight-line rate of depreciation.
4. Example Calculation:
5. Suppose you have an asset that costs $10,000, has a useful life of 5 years, and no salvage value.
6. The straight-line depreciation rate would be ( \frac{1}{5} = 20\% ).
7. Therefore, the double declining rate is ( 2 \times 20\% = 40\% ).
8. In the first year, the depreciation expense would be: [ 10,000 \times 40\% = 4,000 ]
9. The book value at the end of the first year would then be ( 10,000 - 4,000 = 6,000 ).
10. In the second year, the depreciation expense would be: [ 6,000 \times 40\% = 2,400 ]
11. As you can see, the depreciation expense is highest in the first year and decreases in subsequent years.
12. Why DDB Results in Higher Early Expenses:
13. The DDB method front-loads the depreciation expense, reflecting the idea that many assets lose value more quickly in their early years. This is particularly relevant for assets that may become obsolete or less efficient over time.

Explanation of Why Other Options Are Incorrect or Weaker A. Straight-line depreciation: - This method spreads the cost of the asset evenly over its useful life. Each year, the same amount is expensed, which means there is no front-loading of expenses. Therefore, it does not result in the highest expense in the early years. B. Double declining balance depreciation: - As explained, this is the correct answer because it results in the highest depreciation expense in the early years due to its accelerated nature. C. Units of production depreciation: - This method bases depreciation on the actual usage of the asset. If the asset is used more in later years, the expense could be higher then, but it does not guarantee higher expenses in the early years. It is variable and depends on the asset's usage. D. Sum-of-the-years'-digits depreciation: - This is another accelerated method, but it does not result in as high an expense in the early years as the double declining balance method. The formula for this method is: [ \text{Depreciation Expense} = \frac{\text{Remaining Life}}{\text{Sum of the Years' Digits}} \times \text{Cost} ] - While it does front-load expenses, the DDB method typically results in higher early-year expenses compared to this method. Revision Summary

• The double declining balance method results in the highest depreciation expense in the early years due to its accelerated nature.
• Straight-line depreciation spreads expenses evenly over the asset's life, resulting in lower early-year expenses.
• Units of production depreciation varies based on usage, and sum-of-the-years'-digits is less aggressive than DDB.
• Understanding the mechanics of each method is crucial for selecting the appropriate depreciation strategy for financial reporting.