Question

    Under which method of depreciation, the value of a fixed asset is reduced uniformly over its useful life?

    A Diminishing value method Correct Answer Incorrect Answer
    B Sum of years’ digit method Correct Answer Incorrect Answer
    C Straight line method Correct Answer Incorrect Answer
    D Horizontal line method Correct Answer Incorrect Answer
    E Vertical line method Correct Answer Incorrect Answer

    Solution

    The method of depreciation in which the value of a fixed asset is reduced uniformly over its useful life is called the Straight-line method of depreciation. Under this method, the cost of the asset is spread out evenly over its useful life, and a fixed amount of depreciation is charged in each accounting period. The formula for calculating depreciation under the straight-line method is as follows: Depreciation expense = (Cost of asset – Salvage value) / Useful life

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