18.5.3 - Sum of Years’ Digits Method
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Practice Questions
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What is depreciation?
💡 Hint: Think about how assets lose value over time.
Define residual value.
💡 Hint: Consider what you could sell the asset for after using it.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the Sum of Years' Digits Method allocate more depreciation to?
💡 Hint: Consider when an asset is usually the most beneficial.
True or False: The Sum of Years' Digits Method can potentially overstate expenses in the later years.
💡 Hint: Think about how expenses change over time.
2 more questions available
Challenge Problems
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A company purchases a vehicle for $18,000, with an expected residual value of $2,000 and a useful life of 6 years. Calculate the depreciation expense for the first three years using the Sum of Years' Digits Method.
💡 Hint: Use the formula to break it down and remember to adjust for the total depreciation.
An asset is bought for $50,000, with a residual value of $10,000 and a life of 5 years. Calculate the first year's depreciation and explain the financial implications of using the Sum of Years' Digits method.
💡 Hint: Prioritize early expenditure that aligns with asset usage.
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