Which of the following methodologies involves a changing depreciation rate each year?

The Sum of Years method, which is identified as the correct answer, involves a depreciation calculation that does indeed use a changing rate each year. This method is based on the principle of accelerated depreciation, where an asset is depreciated more in the earlier years of its life.

In the Sum of Years method, the total number of years of the asset's useful life is added together, and each year's depreciation is determined by allocating a fraction of the remaining book value of the asset using the sum of the years' digits as the denominator. As a result, in each subsequent year, the depreciation expense will decrease, reflecting the declining value of the asset.

This contrasts with other methods like the Straight-Line method, which allocates an equal amount of depreciation expense every year, and the Double Declining method, which applies a constant percentage (double the straight-line rate) to the book value of the asset at the beginning of each year, also resulting in a changing depreciation amount. The MACRS method, while also accelerated, follows specific guidelines for depreciation rates that are predetermined and do not change yearly in the same tailored manner as the Sum of Years method.

The nature of the Sum of Years method allows for a higher depreciation expense in the early years and a lower