Discussion
Consider the following statements about depreciation.
1. Depreciation is not itself a cash flow 2. Declining balance ignores salvage value in its annual calculation 3. The total written off over the life depends on the method chosen
Answer: B
Correct answer: 1 and 2 only are correct
Statements 1 and 2 are correct: depreciation moves no cash, and declining balance applies its rate to the book value without deducting salvage. Statement 3 is the essential point about method choice - the total written off is the depreciable base whatever method is used, and only the timing differs.
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