Final answer:
The sum-of-the-years'-digits depreciation method allocates more depreciation expense to the earlier years of an asset's life. For Year 1, the depreciation is $120,000.
Step-by-step explanation:
The sum-of-the-years'-digits depreciation method is a method of depreciation that allocates more depreciation expense to the earlier years of an asset's life and less depreciation expense to the later years. This method assumes that an asset is more productive in the early years of its life and becomes less productive as it gets older.
To calculate the depreciation for Year 1 using the sum-of-the-years'-digits method, you will need to calculate the sum of the digits for the asset's useful life. In this case, the asset has a useful life of 5 years, so the sum of the digits is 1+2+3+4+5 = 15.
Next, you need to determine the fraction of the asset's cost that will be depreciated in Year 1. For Year 1, you will use the fraction 5/15 (since it's the first year of the asset's life). Finally, multiply this fraction by the asset's cost minus its estimated residual value to calculate the depreciation for Year 1. Depreciation for Year 1 = ($375,000 - $15,000) x (5/15) = $360,000 x (1/3) = $120,000