C is corrent because under the straight-line method, a smaller portion of the asset’s cost is charged against income in the early years than would occur using DDB. Therefore, at the date of sale, the book value using SL will be higher than the DDB book value. If the proceeds from the sale are higher than both book values, the one with the higher book value (SL method) will show a smaller gain. If the proceeds are less than both book values, the one with the higher book value (SL method) will show a larger loss.
A is incorrect. Under the straight-line method, a smaller portion of the asset’s cost is charged against income in the early years than would occur using DDB. Therefore, at the date of sale, the book value using SL will be higher than the DDB book value. If the proceeds from the sale are higher than both book values, the one with the higher book value (SL method) will show a smaller gain. If the proceeds are less than both book values, the one with the higher book value (SL method) will show a larger loss.
A is incorrect. Under the straight-line method, a smaller portion of the asset’s cost is charged against income in the early years than would occur using DDB. Therefore, at the date of sale, the book value using SL will be higher than the DDB book value. If the proceeds from the sale are higher than both book values, the one with the higher book value (SL method) will show a smaller gain. If the proceeds are less than both book values, the one with the higher book value (SL method) will show a larger loss.
D is incorrect. Under the straight-line method, a smaller portion of the asset’s cost is charged against income in the early years than would occur using DDB. Therefore, at the date of sale, the book value using SL will be higher than the DDB book value. If the proceeds from the sale are higher than both book values, the one with the higher book value (SL method) will show a smaller gain. If the proceeds are less than both book values, the one with the higher book value (SL method) will show a larger loss.
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