Question 3 (10 marks)

The board of directors of ABC incorporated is reviewing the 2019 Annual report. A new board member a wealthy woman with little business experience questions the company accountant about depreciation amounts The New board member wonders why depreciation expense has decreased from R240 000 in 2017 to R224000 in 2018 to R216000 in 2019. She states that she could understand the decreasing annual amounts if the company has been disposing of properties each year ,but that this has not occurred. Further she notes that growth in the city is increasing the value of the company properties. Why is the company recording depreciation when the property values are increasing?