Which of the Following Statements Concerning the Sum-Of-The-Years'-Digits Method of Depreciation

question 8

Multiple Choice

Which of the following statements concerning the sum-of-the-years'-digits method of depreciation is correct?

• A) It is an alternative name for the reducing balance method.
• B) The depreciation charge per annum decreases over the life of the asset.
• C) It is the most common method of depreciation used in Australia.
• D) The formula is: carrying amount multiplied by remaining years of useful life.

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Definitions:

Nominal Rate

The stated interest rate of a financial instrument, without adjustment for inflation or compounding frequencies.

Compounded Monthly

The method of computing interest that includes both the original amount and the interest accrued over past months, applied each month.

Annual Nominal Rate

The annual rate of interest without taking into account the compounding of interest within that year, not reflecting the actual interest earned or paid.

Monthly Compounding

Interest calculation method where interest is added to the principal sum at the end of each month, compounding the amount over time.