A is corrent because composite (group) depreciation averages the service life of a number of property units and depreciates the group as if it were a single unit. The term “group” is used when the assets are similar; the term “composite” is used when they are dissimilar. The mechanical application of both of these methods is identical. The depreciation rate is the following ratio:
|
| | Sum of annual SL depreciation of individual assets
Total asset cost |
Thus, both group and composite depreciation utilize the straight-line depreciation method.
B is incorrect because group depreciation also utilizes the straight-line depreciation method. The mechanical application of both methods (group and composite) is identical.
C is is incorrect because composite depreciation also utilizes the straight-line depreciation method. The mechanical application of both methods (group and composite) is identical.
D
incorrect because both composite and group depreciation utilize the straight-line depreciation method. The mechanical application of both methods is identical; the term group is used when the assets are similar, and the term composite is used when they are dissimilar.
