Which method of depreciation is effective if repairs and maintenance cost of an asset increases as it grows old _________________.

Straight line method

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Sinking Fund

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Annuity

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Reducing Balance

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Solution

The correct option is A Reducing Balance
If there is no production from an asset, depreciation will be charged to the cost of expenses of repairs and maintenance i.e increasing as the asset grows older and This is a variant of the reducing installment or diminishing balance method. the increase in the units of production, the depreciation charge also increases.

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