The correct option is C. Double Declining Balance Method. Explanation of the Correct Answer The Double Declining Balance (DDB) method is an accelerated depreciation method. This means that it allocates a larger portion of the asset's cost as an expense in the earlier years of the asset's life compared to later years. Here’s how it works step-by-step:

1. Understanding Depreciation: Depreciation is the process of allocating the cost of a tangible asset over its useful life. It reflects the wear and tear, usage, or obsolescence of the asset.
2. Accelerated Depreciation: The DDB method is considered an accelerated depreciation method because it allows for higher depreciation expenses in the initial years. This is beneficial for businesses that want to reduce taxable income in the early years of an asset's life.
3. Calculation of DDB:
4. Step 1: Determine the straight-line depreciation rate. This is calculated as: [ \text{Straight-Line Rate} = \frac{1}{\text{Useful Life}} ]
5. Step 2: Double this rate to get the DDB rate.
6. Step 3: Apply the DDB rate to the book value of the asset at the beginning of each year (not the original cost). The formula for the depreciation expense in the first year is: [ \text{Depreciation Expense} = \text{Book Value at Beginning of Year} \times \text{DDB Rate} ]
7. Example Calculation:
8. Suppose an asset costs $10,000, has a useful life of 5 years, and no salvage value.
9. Straight-Line Rate = ( \frac{1}{5} = 0.20 ) or 20%
10. DDB Rate = ( 2 \times 0.20 = 0.40 ) or 40%
11. Year 1 Depreciation = ( 10,000 \times 0.40 = 4,000 )
12. Book Value at end of Year 1 = ( 10,000 - 4,000 = 6,000 )
13. Year 2 Depreciation = ( 6,000 \times 0.40 = 2,400 )
14. Year 3 Depreciation = ( 3,600 \times 0.40 = 1,440 )
15. As you can see, the depreciation expense decreases over time.

Why Other Options Are Incorrect or Weaker

• A. Straight-Line Method: This method spreads the cost of the asset evenly over its useful life. Each year, the same amount is expensed, which means it does not result in higher depreciation in the early years. For example, if the asset costs $10,000 and has a useful life of 5 years, the annual depreciation would be $2,000 each year.
• B. Units of Production Method: This method bases depreciation on the actual usage of the asset. If the asset is used more in some years than others, the depreciation expense will vary. However, it does not inherently lead to higher depreciation in the early years unless the asset is used more heavily at the beginning of its life.
• D. Sum-of-the-Years'-Digits Method: This is another accelerated method, but it does not result in as high an expense in the early years as the DDB method. The formula for this method involves a fraction where the numerator is the remaining life of the asset and the denominator is the sum of the years' digits. While it does provide higher depreciation in the early years compared to straight-line, it is generally less aggressive than the DDB method.

Revision Summary

• The Double Declining Balance method results in the highest depreciation expense in the early years due to its accelerated nature.
• It calculates depreciation based on a double rate of the straight-line method, applied to the book value of the asset.
• Other methods like Straight-Line and Units of Production do not provide higher early-year expenses, while Sum-of-the-Years'-Digits is less aggressive than DDB.
• Understanding the different methods of depreciation is crucial for financial reporting and tax planning.