The depreciation method using a fixed rate applied to the undepreciated cost of the asset each year, resulting in successively smaller depreciation charges as the undepreciated cost diminishes year by year is called the
A) declining-balance method.
B) sum-of-the-years'-digit method.
C) units-of-production method.
D) straight-line method.

Question

Quizplus · Accepted Answer

The declining-balance method is exactly described in the given definition. The undepreciated cost is multiplied by a fixed rate each year, resulting in a decreasing depreciation charge as the value of the asset decreases over time. The other methods listed, such as the sum-of-the-years'-digit method and units-of-production method, use different formulas to calculate depreciation. The straight-line method is a fixed rate of depreciation each year on the original cost of the asset.

The Depreciation Method Using a Fixed Rate Applied to the Undepreciated