Which depreciation method gives the highest early-year charge? Among the listed methods, which produces the maximum depreciation (especially in the first year) for plant equipment?

Introduction / Context:Process plants often prefer accelerated depreciation for tax and cash-flow reasons. Different methods allocate the depreciable base differently across the life of the asset.

Given Data / Assumptions:

• Four methods compared: diminishing balance, straight-line, SYD, and sinking fund.
• Focus: which yields highest depreciation in early years (especially year 1).

Concept / Approach:Declining-balance applies a fixed percentage to the book value each year. Since book value is largest at the beginning, the first-year charge is maximal among common methods. SYD also accelerates, but less aggressively than declining-balance. Straight-line is uniform each year, and sinking fund produces low early charges that increase later.

Step-by-Step Solution:Straight-line: Dep = (P − S)/n (constant each year).SYD: weighted by remaining life; first year is n/SYD, lower than typical high declining-balance rates.Declining-balance: Dep(1) = rate * P (or book at start), often chosen so early depreciation is maximized.Sinking fund: accumulates funds; depreciation charge effectively increases with time.

Verification / Alternative check:Example calculations show first-year diminishing-balance charges exceed SYD and straight-line for comparable assumptions.

Why Other Options Are Wrong:

• Straight-line: not accelerated; constant each year.
• SYD: accelerated but typically below declining-balance in year 1.
• Sinking fund: back-loaded; smallest early charges.

Common Pitfalls:

• Confusing cash accumulation (sinking fund) with depreciation allocation.

Final Answer:Diminishing balance (declining-balance) method