Question

Under the declining-balance method of deprecation, an asset may not be depreciated below its estimated salvage value

a) True
b) False

Answer 1

True, the declining-balance method does not depreciate an asset below its estimated salvage value, as it serves as the floor value that cannot be undercut by depreciation.

Step-by-step explanation:

Under the declining-balance method of depreciation, an asset is indeed not depreciated below its estimated salvage value. This is true because the declining-balance method accelerates the depreciation expense in the earlier years of the asset's useful life but always leaves the salvage value as the floor which the book value cannot fall below. When the book value of the asset reaches the estimated salvage value, depreciation expenses cease, ensuring the asset is not depreciated further.