What is the primary advantage of using the sum-of-the-years'-digits method?

Practice Questions

1 question

Simplicity in calculations
Matching expenses with revenues more accurately
Lower initial depreciation expense
Higher residual value

Questions & Step-by-step Solutions

1 item

Q: What is the primary advantage of using the sum-of-the-years'-digits method?

Solution: The sum-of-the-years'-digits method matches expenses with revenues more accurately by allocating more depreciation in the earlier years.

Steps: 5

Step 1: Understand that the sum-of-the-years'-digits method is a way to calculate depreciation for an asset.
Step 2: Know that depreciation is the process of allocating the cost of an asset over its useful life.
Step 3: Realize that this method gives higher depreciation expenses in the earlier years of the asset's life.
Step 4: Recognize that matching higher expenses with higher revenues in the early years provides a more accurate financial picture.
Step 5: Conclude that the primary advantage is better matching of expenses with revenues.

What is the primary advantage of using the sum-of-the-years'-digits method?

Practice Questions

Questions & Step-by-step Solutions

Related Questions

On a scale of 0–10, how likely are you to recommend The Soulshift Academy?