'P' is the investment made on an equipment, 'S' is its salvage value and 'n is the life of the equipment in years. The depreciation for Rath year by the sum-of year‟s digit method will be____________________?
Correct answer: D. [2 (n - m + 1)/n(n + 1)]. (P - S)
- A. (P - S)/n
- B. 1 - (P/S)1/m
- C. (m/n) (P - S)
- D. [2 (n - m + 1)/n(n + 1)]. (P - S)
Explanation
In the sum-of-the-years'-digits method, the mth-year depreciation is the remaining life fraction times the depreciable amount: [2(n-m+1)/n(n+1)](P-S). The numerator decreases each year, reflecting accelerated depreciation.
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