Which of the following is representative of how depreciation expense is handled in the face of inflation?
A)it increases annually with the rate of inflation
B)it decreases annually in nominal terms
C)the depreciable base is not altered by inflation
D)the real value of the depreciation is fixed

Question

Quizplus · Accepted Answer

Depreciation expense is calculated based on the depreciable base of an asset, which is the cost of the asset minus its estimated salvage value. Inflation does not affect the depreciable base, so depreciation expense remains the same in real terms even as the value of money decreases over time. Therefore, option C is the correct choice.

Which of the Following Is Representative of How Depreciation Expense