Multiple choice

If an asset is charged to depreciation by straight line method instead of diminishing balance method at the same rate of depreciation, which of the following will be the effect at the time of its sale?

  1. It will show lower profit at the time of sale.

  2. It will show more loss at the time of sale.

  3. It will show higher profit at the time of sale.

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The amount of depreciation is charged in straight line method. Thus, it will result in lower WDV and higher profits at the time of sale.

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