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The declining balance method applies a fixed rate to the

  • A.original first cost each year
  • B.depreciable base each year
  • C.salvage value each year
  • D.book value at the start of the year

Answer: D

Correct answer: book value at the start of the year

Declining balance applies a fixed percentage to the book value remaining, so the charge falls each year as the base shrinks. This is why it never reaches zero by arithmetic alone, and why salvage plays no part in the annual calculation - it enters only as a floor below which the asset may not be written.

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