Question

Depreciation computed under double-declining-balance will decrease each year because:

a) the book value used in the computation each year decreases
b) the rate used in the computation each year increases
c) the rate used in the computation each year decreases
d) the book value used in the computation each year increases

Answer 1

Depreciation computed under double-declining-balance will decrease each year because the book value used in the computation each year increases. The correct option is d.

Step-by-step explanation:

The correct answer is option d) the book value used in the computation each year increases. In the double-declining-balance method, depreciation is calculated by multiplying the straight-line depreciation rate (usually double the straight-line rate) by the book value at the beginning of each period.

The book value represents the cost of the asset minus the accumulated depreciation. As the asset gets older, the accumulated depreciation increases, resulting in a higher book value.

Therefore, the book value used in the computation each year increases, and as a result, the depreciation computed under double-declining-balance will decrease each year. The correct option is d.