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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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