In the Declining Balance Method, what is the primary factor that determines the amount of depreciation expense?
Practice Questions
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Q1
In the Declining Balance Method, what is the primary factor that determines the amount of depreciation expense?
Useful Life
Salvage Value
Depreciation Rate
Asset Cost
In the Declining Balance Method, the depreciation expense is determined by applying a fixed depreciation rate to the book value of the asset at the beginning of each period.
Questions & Step-by-step Solutions
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Q
Q: In the Declining Balance Method, what is the primary factor that determines the amount of depreciation expense?
Solution: In the Declining Balance Method, the depreciation expense is determined by applying a fixed depreciation rate to the book value of the asset at the beginning of each period.
Steps: 6
Step 1: Understand that the Declining Balance Method is a way to calculate how much an asset loses value over time.
Step 2: Know that depreciation is the term used for this loss of value.
Step 3: Identify that a fixed depreciation rate is a percentage that you will use to calculate depreciation.
Step 4: Realize that the book value is the value of the asset at the beginning of each period (like a year).
Step 5: To find the depreciation expense, multiply the book value of the asset by the fixed depreciation rate.
Step 6: Remember that each year, the book value will decrease because of the depreciation expense calculated in the previous step.
