An asset bought for P 9,000.00 has a 10-year economic life and a P 1,000.00 salvage value. Find the depreciation over the first three years using the sum-of-the-years'-digits method ____________________?
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Answer: B. P 3,927.27
Explanation
Sum-of-the-years'-digits depreciation calculates accelerated expense using descending year fractions. Depreciable base equals initial asset cost minus the estimated salvage value. Accumulating depreciation over the first three years yields a total of P 3,927.27. SYD depreciation accelerates write-offs into the early years of an asset economic life. The denominator of the fraction is calculated using the sum of the digits formula. Remaining useful life years form the numerator for each annual depreciation fraction.
Corporate accountants use accelerated depreciation methods to defer tax liabilities early. Machinery and equipment with high initial productivity often utilize SYD depreciation. Financial statement analysis accounts for varying depreciation schedules across companies. Values like P 3,279.27 result from miscalculating the sum-of-the-years'-digits denominator. Other incorrect totals stem from using straight-line instead of accelerated fractions. Arithmetic errors in summing the first three years of depreciation lead to wrong sums.
- Subject
- Engineering
- Category
- Civil Engineering
- Topic
- —
- Difficulty
- medium
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