When an asset loses value over time in equal amounts each period, this process is known as:

• A. Declining balance depreciation
• B. Straight-line depreciation
• C. Amortization
• D. Units-of-production depreciation

Answer: (B)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the process of allocating the cost of a tangible asset over its useful life. It reflects the reduction in value of the asset due to wear and tear, obsolescence, or other factors.
2. Learn about straight-line depreciation: Straight-line depreciation is a method where the asset's value decreases by an equal amount each accounting period. This is the simplest and most commonly used method of depreciation.
3. Compare straight-line depreciation to other methods: Declining balance depreciation involves reducing the asset's value by a fixed percentage each period, resulting in higher depreciation expenses in earlier periods. Units-of-production depreciation allocates depreciation based on the asset's usage or output. Amortization is used for intangible assets rather than tangible ones.
4. Identify the key characteristic of straight-line depreciation: The defining feature of straight-line depreciation is the equal allocation of depreciation expense across all periods of the asset's useful life.
5. Conclude that the correct answer is straight-line depreciation, as it matches the description of losing value in equal amounts each period.