Question

When a company uses the diminishing balance depreciation method for an asset, the expense will be _________ in the early years of the asset's life, and ________ in the later years of the asset's life.

A) Higher: Lower
B) None of the other answers is correct - we cannot tell without further information.
C) The same: The same
D) Lower: Higher

Answer 1

When a company uses the diminishing balance depreciation method for an asset, the expense will be higher in the early years of the asset's life and lower in the later years of the asset's life.

Step-by-step explanation:

The correct answer is D) Lower: Higher.

When a company uses the diminishing balance depreciation method for an asset, the expense will be higher in the early years of the asset's life and lower in the later years of the asset's life.

This method assumes that assets will lose their value more quickly in the early years and slower in the later years. As a result, the depreciation expense is higher at the beginning to reflect this faster rate of value loss and decreases over time as the asset's value diminishes.