CSEET · Fundamentals of Accounting · Depreciation and Amortization
Under the straight line method of depreciation, if the cost, residual value and useful life of an asset do not change, the annual depreciation charge will:
Under the straight line method the annual depreciation charge stays constant over the useful life, provided the residual value and other inputs do not change. Decreasing charges arise under the diminishing balance method, and output-linked charges arise under the units of production method.
- ADecrease every year as the book value falls
- BRemain constant over the useful lifeCorrect
- CIncrease every year as repairs rise
- DVary with the units produced in each year
Explanation
Straight-line depreciation results in a constant charge over the useful life if the residual value of the asset does not change. A decreasing charge belongs to the diminishing balance method, and a charge varying with output belongs to the units of production method.
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