Which statement describes declining-balance depreciation?

Which statement describes declining-balance depreciation?

• A. It uses a fixed rate applied to the asset's cost each year
• B. It uses a fixed rate applied to the asset's book value each year
• C. It yields a constant depreciation amount each year
• D. It accelerates depreciation by applying a fixed rate to the asset's book value each year

Answer: (D)

Declining-balance depreciation is an accelerated method that applies a fixed percentage to the asset’s book value (cost minus accumulated depreciation) each year. Because the book value is highest at the start, the first year’s depreciation is large, and as the book value declines, the depreciation in later years becomes smaller, even though the rate stays the same. This pattern results in more expense recorded in the early years of the asset’s life. So the statement is describing the method accurately: depreciation is accelerated by applying a fixed rate to the asset’s book value each year, not to its original cost and not as a constant dollar amount each year.

Declining-balance depreciation is an accelerated method that applies a fixed percentage to the asset’s book value (cost minus accumulated depreciation) each year. Because the book value is highest at the start, the first year’s depreciation is large, and as the book value declines, the depreciation in later years becomes smaller, even though the rate stays the same. This pattern results in more expense recorded in the early years of the asset’s life.

So the statement is describing the method accurately: depreciation is accelerated by applying a fixed rate to the asset’s book value each year, not to its original cost and not as a constant dollar amount each year.