Financial accounting homework | Business & Finance homework help
The company in question uses the straight-line depreciation method for reporting in its financial statements. This method is commonly used because it is the simplest and most widely accepted form of depreciation. The straight-line method allocates an equal amount of depreciation expense over a set period of time regardless of how much or little assets are used during that period. It also has fewer errors as it does not require calculations that involve estimates, which can lead to inaccurate results if incorrect assumptions are made.
This choice would likely be beneficial to the company as they want their financial statements to accurately represent the performance of their business and reflect any investments they have made throughout the year. The simplicity of this method makes it easier to understand and report on, allowing for clearer communication between management, investors and other stakeholders about the company’s finances. Additionally, using this technique will provide consistency when reviewing information from previous years due to its systematic approach. Overall, this method provides a reliable way for companies to effectively report on their financial data while keeping costs down at the same time.