Engineering Board Exam Reviewer · Depreciation: Declining Balance and Sum-of-Years-Digit Methods · medium

Among straight-line, sinking fund, and declining balance methods, which typically produces the largest depreciation charge in the first year?

  1. Declining balance method
  2. Straight-line method
  3. Sinking fund method
  4. They are always equal in year 1

Answer

A. Declining balance method

Solution

The declining balance method is an accelerated method, charging depreciation as a fixed percentage of the (larger) beginning book value, so it produces the largest first-year charge.

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