Answer:
American Eagle uses the straight-line depreciation method in depreciating its property, plant, and equipment.
Explanation:
The straight-line depreciation method involves applying the same rate on the initial depreciable amount or the same amount of depreciation expense throughout the asset's useful life. For American Eagle, this method involves the estimation of the useful life of each property, plant, and equipment class. The company has established that its buildings have 25 years useful life, leasehold improvements 10 years, fixtures and equipment 5 years, while information technology assets have 3 to 5 years. This implies that after deducting any estimated salvage value, the depreciable amount (basis) of the asset is divided by the number of estimated useful life. For building, this can also be expressed in percentage terms as 4% (100/25); for leasehold improvements as 10% (100/10); for fixtures and equipment as 20% (100/5); and same for information technology.
