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Questions and Answers
What is depreciation?
What is depreciation?
- The increase in the value of an asset over time
- The decrease in the value of an asset over time (correct)
- The initial value of an asset
- The cost of maintaining an asset
How does depreciation affect financial statements?
How does depreciation affect financial statements?
- It reduces the value of assets on the balance sheet (correct)
- It increases the value of assets on the balance sheet
- It has no impact on financial statements
- It only affects the income statement
Which method of depreciation assumes that the asset provides more value in the early years of its life?
Which method of depreciation assumes that the asset provides more value in the early years of its life?
- Units of production method
- Straight-line method
- Double-declining balance method (correct)
- Sum-of-the-years’-digits method
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