ACC 310F Lecture Notes - Lecture 33: Boise Cascade
Document Summary
The units-of-activity method is not nearly as popular as the straight-line method primarily because it is often difficult for companies to reasonably estimate total activity. Chevron and boise cascade (a forestry company), do use this method. When the productivity of an asset varies significantly from one period to another, the units-of-activity method results in the best matching of expenses with revenues. The declining-balance method produces a decreasing annual depreciation expense over the asset"s useful life. The method is so named because the periodic depreciation is based on a declining book value (cost less accumulated depreciation) of the asset. With this method, companies compute annual depreciation expense by multiplying the book value at the beginning of the year by the declining-balance depreciation rate. The depreciation rate remains constant from year to year, but the book value to which the rate is applied declines each year. At the beginning of the first year, book value is the cost of the asset.
