Question

A firm buys a machine that wears out faster in early years but provides greater efficiency initially. Which depreciation method would most accurately reflect this pattern?

Options

• Straight Line Method

• Written Down Value Method

• Machine Hour Rate Method

• Revaluation Method

Answer 1

Written Down Value Method

Explanation:

The Written Down Value Method applies a fixed rate of depreciation to the asset’s decreasing book value each year. This results in higher depreciation in the early years,when the asset’s effectiveness and wear are greatest,and lower charges later, matching the asset’s real-life performance pattern accurately.