Do the straight-line method and the production method and the double-declining-balance method differ in their effect on the company's profitability?

Answer 1

The Straight-Line method tends to produce higher net income numbers and higher long-lived asset book values in the early years of a long-lived asset's life.

Answer 2

Yes, the choice of depreciation method can affect a company's profitability. The straight-line method evenly distributes depreciation over the useful life of an asset, which can lead to stable financial statements. The production method ties depreciation expense to the level of production, impacting profitability based on usage. The double-declining-balance method accelerates depreciation in earlier years, potentially impacting profitability by reducing taxable income.