Diminishing Line Method of Depreciation Quiz
Test your knowledge of the diminishing balance method of depreciation, its applications, and calculations.
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Quiz Questions & Answers
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Question 1: In diminishing line method, depreciation is calculated on:
Original cost
Market value
Book value
Salvage value
Question 2: Which type of assets is the diminishing balance method most suitable for?
Assets with constant utility
Assets with higher utility in later years
Assets with higher utility in initial years
Assets with no salvage value
Question 3: If an asset costs ₹100,000 and depreciation rate is 20%, what is the depreciation in second year?
₹20,000
₹16,000
₹12,000
₹8,000
Question 4: What is a key advantage of the diminishing balance method?
Simpler calculations
Equal depreciation each year
Better matching of income and expenses
Lower total depreciation
Question 5: Under diminishing balance method, the annual depreciation amount:
Increases over time
Remains constant
Decreases over time
Fluctuates randomly
Question 6: Which financial statement is directly affected by the depreciation method chosen?
Cash Flow Statement only
Balance Sheet and Income Statement
Income Statement only
Balance Sheet only
Question 7: What happens to the book value of an asset under diminishing balance method?
Never reaches zero
Reaches zero quickly
Remains constant
Increases over time
Question 8: When calculating depreciation rate under diminishing balance method, what formula is used?
1/n × 100
r = (1 - n√(S/C)) × 100
Cost/Life
(Cost - Salvage)/Life