The correct answer is D. Depletion Method.
Depletion is a method of accounting for the exhaustion of natural resources. It is a process of allocating the cost of a natural resource to the periods in which it is used. The depletion expense is calculated by multiplying the unit cost of the resource by the number of units extracted during the period.
The depletion method is suggested for coal mines because it is a natural resource that is depleted over time. The cost of the coal mine is allocated to the periods in which the coal is extracted. This method provides a more accurate picture of the cost of the coal that is being sold.
The other methods of depreciation are not appropriate for coal mines because they do not take into account the fact that the coal mine is a natural resource that is depleted over time. The diminishing balance method and the fixed instalment method allocate the cost of the coal mine evenly over the life of the mine. This does not reflect the fact that the coal mine is being depleted over time. The sum of years digits method allocates a higher depreciation expense in the early years of the mine’s life and a lower depreciation expense in the later years. This does not reflect the fact that the coal mine is being depleted at a constant rate over time.