Asset C3PO has a depreciable base of $16.5 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method?
A)$4.5 million.
B)$8.25 million.
C)$12 million.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Under the sum-of-the-years' digits method, the accumulated depreciation is calculated by multiplying the depreciable base with a fraction of the sum of the years' digits. The sum of the years' digits for a 10-year service life is (10+9+8+7+6+5+4+3+2+1) = 55. The fraction for the 5th year, therefore, is 5/55. The accumulated depreciation at the end of year five would be 5/55 multiplied by the depreciable base, which is $12 million (approx). Hence, the correct answer is option C ($12 million).

Asset C3PO Has a Depreciable Base of $16