PRC-1 · Chapter 6 · Question 12 of 100
Which of the following statements accurately contrasts the straight-line and reducing balance methods of depreciation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The straight-line method charges a constant amount each year, whereas the reducing balance method charges a declining amount each year.
Explanation
Straight-line allocates a fixed equal amount every period. Reducing balance applies a fixed percentage to the declining carrying amount, resulting in a higher charge in early years and a lower charge in later years.
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