Depreciation at replacement price method
Depreciation fund method
Depletion mehtod
Sum of year's digits mehtod
Answer is Right!
Answer is Wrong!
The correct answer is: A. Depreciation at replacement price method.
Depreciation at replacement price method is a depreciation method that is specially designed to provide funds for replacement of assets. It is based on the assumption that the asset should be depreciated at its replacement cost, rather than its original cost. This method is often used for assets that have a long life and are subject to technological obsolescence.
The other options are incorrect because they are not specifically designed to provide funds for replacement of assets.
- Depreciation fund method is a depreciation method that is based on the concept of a depreciation fund. The depreciation fund is a reserve that is created to provide for the replacement of the asset at the end of its useful life. The amount of depreciation expense is calculated based on the estimated useful life of the asset and the expected salvage value.
- Depletion method is a depreciation method that is used for natural resources, such as oil and gas. The depletion expense is calculated based on the estimated units of production that will be extracted from the resource.
- Sum of year’s digits method is a depreciation method that is based on the assumption that the asset is used more heavily in the early years of its life. The depreciation expense is calculated based on the sum of the digits of the asset’s useful life.