Diminishing Line Method of Depreciation Quiz
Test your knowledge of the diminishing balance method of depreciation, its application, and key concepts.
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Quiz Questions & Answers
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Question 1: Under the diminishing line method, depreciation is calculated on:
Original cost throughout the asset's life
Book value at the beginning of each year
Market value at the end of each year
Salvage value of the asset
Question 2: Which of the following is a key characteristic of diminishing line method?
Equal depreciation amount each year
Increasing depreciation over time
Decreasing depreciation charges each year
Zero depreciation in final years
Question 3: If an asset costs $10,000 and the depreciation rate is 20%, what will be the book value after two years?
$6,400
$6,000
$8,000
$7,200
Question 4: Which type of assets is the diminishing line method most suitable for?
Land and buildings
Technology and vehicles
Office furniture
Patents and trademarks
Question 5: What happens to the depreciation expense in subsequent years under this method?
Remains constant
Increases gradually
Decreases gradually
Fluctuates randomly
Question 6: The diminishing line method is also known as:
Straight line method
Reducing balance method
Sum of years method
Production unit method
Question 7: What is the main advantage of using diminishing line method?
Easier calculations
Better matching of cost with revenue
Higher salvage value
Lower maintenance costs
Question 8: When calculating depreciation under this method, what remains constant?
Annual depreciation amount
Book value reduction
Depreciation rate percentage
Asset's market value