Question

Computing Sum-of-the-Years'-Digits Depreciation

The company acquired a machine on January 1 at an original cost of $115,000. The machine's estimated residual value is $20,000, and its estimated life is five years. Assume that the company uses sum-of-the-years'-digits depreciation.

Compute depreciation expense for each year of the machine's 5-year life. Round your answers to the nearest whole dollar.

Year 1	$
Year 2	$
Year 3	$
Year 4	$
Year 5	$

Compute book value at the end of each year of the machine's 5-year life. Round your answers to the nearest whole dollar.

Year 1	$
Year 2	$
Year 3	$
Year 4	$
Year 5	$

Answer 1

Depreciation expense = (Remaining useful life of the asset) / Sum of the years digits x Depreciable cost

Year	Depreciation base	Remaining life of machine	Depreciation fraction	Depreciation Expense	Book Value
1	95000	5	5/15*	31,666.67	83,333.33
2	95000	4	4/15*	25,333.33	58,000.00
3	95000	3	3/15*	19,000.00	39,000.00
4	95000	2	2/15*	12,666.67	26,333.33
5	95000	1	1/15*	6,333.33	20,000.00

Depreciation Expense

Year	Depreciation Expense
1	31,666.67
2	25,333.33
3	19,000.00
4	12,666.67
5	6,333.33

Year	Book Value
1	83,333.33
2	58,000.00
3	39,000.00
4	26,333.33
5	20,000.00