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The sinking fund method charges depreciation that

  • A.increases each year
  • B.decreases each year
  • C.stays constant each year
  • D.varies with the output produced

Answer: A

Correct answer: increases each year

The sinking fund method assumes a fund earning interest, so the amounts set aside early have longer to accumulate and less needs to be charged then; the charge rises year by year. It is the mirror image of the accelerated methods and is rarely used for tax, since it defers the deduction rather than advancing it.

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