Skip to content

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

Which statement about the Straight Line Method of depreciation is correct?

Under SLM the depreciation charge is the same amount every year, so as the book value declines the fixed amount forms a rising percentage of it. A falling or front-loaded charge belongs to the diminishing balance method.

  1. AThe depreciation charge is the same every year, while the rate on the book value rises over timeCorrect
  2. BThe depreciation charge falls every year as the book value falls
  3. CThe depreciation charge is higher in the early years of the asset's life
  4. DThe method charges no depreciation in the year in which the asset is fully used

Explanation

SLM charges an equal amount each year. As the book value declines, the same amount is a growing percentage of the book value. The other options describe the diminishing balance method or are false.

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