Aplant asset has a cost of $24,000 and a residual value of $6,000. the asset has a threeyear life.

if depreciation in the third year amounted to $3,000, which depreciation method was used?

a. straight-line
b. declining-balance
c. sum-of-the-years'-digits
d. cannot tell from information given

It Sum-of-the -years'-digits method

Explanation:

Depreciation Expense=[Remaining useful life of the asset÷ Sum of the year's digit )×Depreciable cost

Sum-of-the -years'-digits= 3+2+1= 6

Depreciable cost = $24,000- $6,000 = $18,000

Year 1 -Depreciation = [3/6] * $18,000

                                  = $9,000

Year 2-Depreciation =[2/6] * $18,000

                                 = $6000

Year 3-Depreciation =[1/6] * $18,000

                                 = $3000

The sum of years’ digits method is a form of accelerated depreciation that is based on the assumption that the productivity of the asset decreases with the passage of time.

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