Question

Best method of depreciation applicable to wasting assets is method.

• A. Insurance policy
• B. Annuity
• C. Output
• D. Revaluation

Answer 1

Answer:

C. Output

Wasting assets are assets that get used up or exhausted over time, like mines, quarries, or oil wells. Depreciation for such assets should be based on actual usage or production, not merely the passage of time. The Output Method (also called Units of Production Method) calculates depreciation according to the quantity of output or production during the accounting period. Other methods: Insurance Policy Method: Related to insuring the asset, not suitable for wasting assets. Annuity Method: Spreads cost with interest, not based on actual usage. Revaluation Method: Adjusts asset value, not primarily a depreciation method. Hence, the Output Method is best for wasting assets.