Question

A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life. Using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation would affect a gain or loss on the sale of the plant asset by ______.

Answer 1

Using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation would affect a gain or loss on the sale of the plant asset by decreased gain or increase d loss.

Explanation:

Depreciation is indeed an accounting strategy for the distribution of costs over the lifespan or life expectancy in a financial or material resource.

Depreciation shows the amount of money used for an asset. Depreciating capital allows businesses to earn profits from an estate while investing a part of its value on the property every year. It can significantly affect earnings if not taken into account.

The system of diminishing equilibrium often referred to as the method of reducing balances, is a quick form of depreciation which reports higher depreciation costs during an asset's early lifespan and in final years.