A plant asset has a cost of $24,000 and a residual value of $6,000. The asset has a threeyear life.

If depreciation in the third year amounted to $3,000, which depreciation method was used?

a. Straight-line

b. Declining-balance

c. Sum-of-the-years'-digits

d. Cannot tell from information given

It Sum-of-the - years'-digits method

Explanation:

Depreciation Expense=[Remaining useful life of the asset: Sum of the year's digit) * Depreciable cost

Sum-of-the - years'-digits = 3+2+1 = 6

Depreciable cost = $24,000 - $6,000 = $18,000

Year 1 - Depreciation = [3/6] * $18,000

= $9,000

Year 2-Depreciation = [2/6] * $18,000

= $6000

Year 3-Depreciation = [1/6] * $18,000

= $3000

The sum of years' digits method is a form of accelerated depreciation that is based on the assumption that the productivity of the asset decreases with the passage of time.