Reducing Balance Depreciation Misconception

Steps:

• Recall reducing balance method applies fixed percentage to net book value each year, leading to higher initial depreciation.
• Evaluate option A: It claims lower depreciation early, which contradicts the method's accelerating nature.
• Check B: Confirms percentage on reducing balance, matching the formula.
• Verify C: Aligns with use for assets like computers that yield more early benefits.
• Assess D: Notes book value approaches zero asymptotically but never reaches nil.

Why A is correct:

• Reducing balance charges higher depreciation in early years via formula: Depreciation = Net book value × Fixed rate, decreasing over time.

Why the others are wrong:

• B accurately describes the core calculation of applying percentage to diminishing balance.
• C correctly identifies suitability for assets with front-loaded benefits, unlike straight-line.
• D is true as depreciation never fully eliminates residual value mathematically.

Final answer: A