| Sum-of-Years Digits |
An asset often loses more of its value early in its lifetime. A method that exhibits this dynamic is desirable.
Assume an asset depreciates from price 
to salvage value 
in 
years. First compute the sum-of-years as 
. The depreciation for the years after the asset’s purchase is:
Year Number |
Annual Depreciation |
|---|---|
first |
|
second |
|
third |
|
|
|
final |
|
For the 
th year of the asset’s use, the annual depreciation is:
 |
For our example, 
and the sum of years is 
. The depreciation during the first year is
 |
Table 56.2 describes how Declining Balance would depreciate the asset.
Year |
Depreciation |
Year-End Value |
|---|---|---|
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
As expected, the value after years is .
 |
 |
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