Correct Option: 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. This method assumes that the asset will provide equal benefits (or utility) to the business over each period of its useful life. How the Straight-Line Method Works: 1. Determine the Cost of the Asset: This includes the purchase price and any additional costs necessary to prepare the asset for use (e.g., installation, transportation). 2. Estimate the Useful Life: This is the period over which the asset is expected to be used. 3. Estimate the Salvage Value: This is the estimated value of the asset at the end of its useful life. 4. Calculate Annual Depreciation Expense: [ \text{Annual Depreciation Expense} = \frac{\text{Cost of the Asset} - \text{Salvage Value}}{\text{Useful Life}} ] 5. Record the Expense: Each year, the same amount of depreciation expense is recorded in the financial statements until the asset is fully depreciated. For example, if a company purchases a machine for $10,000, expects it to last 5 years, and estimates a salvage value of $1,000, the annual depreciation expense would be: [ \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. Why the Other Options Are Incorrect or Weaker A. Declining Balance Method: - This method allocates a higher depreciation expense in the earlier years of an asset's life and decreases the expense over time. It uses a fixed percentage of the asset's book value at the beginning of each year, leading to a variable expense amount each period. Therefore, it does not allocate the same amount of expense to each period. 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. Thus, it does not provide a consistent expense amount each period. D. Sum-of-the-Years'-Digits Method: - This is an accelerated depreciation method that results in higher 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 the same amount of expense to each period. Summary of Key Points

• The Straight-Line Method allocates the same depreciation expense each period over the asset's useful life.
• It is calculated by subtracting the salvage value from the cost and dividing by the useful life.
• Other methods like Declining Balance, Units of Production, and Sum-of-the-Years'-Digits result in variable expenses over time.
• Understanding the different methods helps in selecting the appropriate one based on the asset's usage and financial reporting needs.