Which of the following methods of calculating depreciation is based on the faulty assumption that an asset provides the same amount of utility in every accounting year?

Correct option is A

The Straight Line Method (SLM) assumes that an asset provides equal utility or benefit during each year of its useful life. Therefore, depreciation is charged at a constant amount every year.
However, this assumption is faulty because in reality:
· Assets generally provide higher utility in earlier years,
· Their efficiency declines over time, and
· Maintenance costs increase as the asset ages.
Thus, the assumption of uniform utility is not realistic, making SLM based on an incorrect premise. Therefore, the correct answer is (a) Straight Line Method.
Information Booster
1. Straight Line Method charges equal depreciation each year, irrespective of actual usage.
2. SLM is simple and widely used for assets with predictable performance (e.g., furniture, buildings).
3. SLM does not consider the declining efficiency or increasing maintenance cost over time.
4. Depreciation under SLM = (Cost – Residual Value) / Useful Life.
5. SLM is accepted under accounting standards but is not always realistic for high-usage or technology assets.