75 Hour Broker Pre Licensing Practice Test

The straight-line method calculates depreciation by taking the adjusted basis of a property and dividing it by the property’s remaining useful life. This provides a consistent and straightforward approach to recognizing and allocating the cost of the property over time.

In this method, the annual depreciation expense remains constant throughout the useful life of the asset, making it an easier calculation and providing predictability in financial statements. It is particularly useful for properties that have a consistent value over time, allowing owners and accountants to plan for maintenance and replacement costs.

Other methods of depreciation, such as the declining balance method or accelerated method, calculate depreciation in a way that reflects higher expenses in the earlier years of an asset's life, which is different from the straight-line approach. The sum-of-the-years-digits method also assigns higher depreciation early on, contrasting with the stability provided by the straight-line method.