Which one 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

The depreciable base (i.e. the original cost or value of the asset) is not adjusted for inflation. This means that while the nominal value of the depreciation expense may increase over time due to inflation, the real value (i.e. in terms of purchasing power) remains the same.

Which One of the Following Is Representative of How Depreciation