The calculation of depreciation using the diminishing-balance method
A) ignores residual value in determining the amount to which a constant rate is applied.
B) multiplies a constant percentage times the previous year's depreciation expense.
C) yields an increasing depreciation expense each period.
D) multiplies a diminishing percentage times a constant carrying amount.

Question

Quizplus · Accepted Answer

The diminishing-balance method of depreciation applies a constant rate to the declining book value of the asset each year, not to its original cost or a constant carrying amount. This method does not consider the residual value in calculating the depreciation expense for the year, but it does ensure that the asset is not depreciated below its residual value over its useful life. Choices B, C, and D are incorrect descriptions of how the diminishing-balance method works.

The Calculation of Depreciation Using the Diminishing-Balance Method