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GCE Financial Accounting 1990 Question 49

Question 49

Depreciation

The straight-line depreciation is

  1. A.a fixed sum set aside for the replacement of the asset
  2. B.a fixed percentage of the balance of the asset at the end of the year
  3. C.an estimated amount each year
  4. D.an increase in the value of the asset
  5. E.a fixed percentage of the cost of the asset written off each year.
Show the answer and explanation

Answer: E (a fixed percentage of the cost of the asset written off each year.)

Explanation

Straight line charges the same percentage of cost (the same amount) every year.