Question

___________ is a method of accelerated depreciation that allocates larger amounts of depreciation as an expense during the earlier years of the life of an asset.

• A. Annuity method
• B. Inventory system of depreciation
• C. Sum of years digit method
• D. All of the above

Answer 1

Answer: (C)

Sum of years digit method

Depreciation expense is used in accounting to allocate the cost of a tangible asset. In straight-line depreciation, the expense amount is the same every year. The Sum-of-the-years-digits method is one of the accelerated depreciation methods. Expenses of machinery are higher in later years than in earlier years. Sum of years digit method allocates larger amount of depreciation in earlier years.