Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Depreciation (Straight Line and Diminishing Balance Methods)

Which of the following is an example of depreciation arising from obsolescence rather than physical wear and tear?

The van written down because a newer, cheaper-to-run model has been launched is obsolescence. Obsolescence means loss of usefulness from technological change or new designs, not from physical use. Wear and tear, weather damage and rusting are physical causes of depreciation, so they do not fit.

  1. AA printing machine losing efficiency due to continuous use over years
  2. BA delivery van being written down because a newer model with lower running cost has been launched in the marketCorrect
  3. CA building weakening due to monsoon exposure
  4. DA lathe machine rusting because of poor storage

Explanation

Obsolescence is loss of value because the asset becomes out of date due to technological change or new designs. The van becoming less useful because of a newer, cheaper-to-run model is obsolescence. The other options describe physical deterioration from use or the elements.

Did you get it right without looking?

One question tells you little. A timed set on Depreciation (Straight Line and Diminishing Balance Methods) shows your real accuracy, how long you take and where you lose marks.

Practise Depreciation (Straight Line and Diminishing Balance Methods)Free diagnostic mock

More Depreciation (Straight Line and Diminishing Balance Methods) questions