Q. Which of the following is true with respect to providing depreciation under diminishing balance method?
a. The amount of depreciation keeps increasing every year while the rate of depreciation keeps decreasing
b. The amount of depreciation and the rate of depreciation decrease every year
c. The amount of depreciation decreases while the rate of depreciation remains the same
d. The amount of depreciation and the rate of depreciation increases every year
ANSWER: The amount of depreciation decreases while the rate of depreciation remains the same
Answer & Explanation
Under the written down value method of depreciation, the rate of percentage of depreciation is fixed, but it applies to the value of the asset at which the asset stands in the books in the beginning of the year. Therefore, the amount of depreciation decreases as the fixed rate of depreciation is charged on written down values of the asset.
