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    Question

    A firm uses straight line for depreciation. It revises

    useful life from 10 to 5 years at midpoint (after 5 years) with no salvage. Effect on annual depreciation going forward? (Initial cost ₹1,00,000.)
    A Remains same Correct Answer Incorrect Answer
    B Decreases Correct Answer Incorrect Answer
    C Increases Correct Answer Incorrect Answer
    D Becomes zero Correct Answer Incorrect Answer
    E Not determinable Correct Answer Incorrect Answer

    Solution

    If original life 10 years, after 5 years carrying = 50,000. If revised remaining life = 5 years, new annual dep = 50,000/5 = 10,000 which is same as before.

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