Question

[The following information applies to the questions displayed below.]

On January 1, 2021, the Allegheny Corporation purchased equipment for $127,000. The estimated service life of the equipment is 10 years and the estimated residual value is $6,000. The equipment is expected to produce 224,000 units during its life.

Required:
Calculate depreciation for 2021 and 2022 using each of the following methods.

1. Sum-of-the-years’-digits (Do not round intermediate calculations. Round final answers to the nearest whole dollar amount.)

2021:

2022 :

Answer 1

Sum-of-the-years’-digits = [10 (10+1)] / 2 = 55
Calculation of Depreciation under Sum-of-the-years’-digits Method
Year	Remaining estimated useful life at beginning of year	Sum-of-the- years’-digits	Applicable percentage	Annual depreciation
2021	10	10/55	18.18%	22,000.00	(127,000-6.000) * 18.18%
2022	9	9/55	16.36%	19,800.00	(127,000-6.000) * 16.36%