Question

# A machine cost \$800,000 on April 1, 2020. Its estimated salvage value is \$80,000 and its...

A machine cost \$800,000 on April 1, 2020. Its estimated salvage value is \$80,000 and its expected life is 4 years.

Calculate the depreciation expense by straight-line for 2020. (Round answer to 0 decimal places, e.g. 5,275.)
 Depreciation expense \$
Calculate the depreciation expense by double-declining balance for 2021. (Round answer to 0 decimal places, e.g. 5,275.)
 Depreciation expense \$
Calculate the depreciation expense by sum-of-the-years'-digits for 2021. (Round answer to 0 decimal places, e.g. 5,275.)
 Depreciation expense \$
Which method would result in the smallest income amount for 2021?
 Sum-of-the-years'-digits depreciationStraight-line depreciationDouble-declining depreciation

Straight line Depreciation = (Original Value - Salvage Value) / Useful Life
= (\$800000 - 80000) / 4 = \$180000

For 2020 = \$180000 x 9/12 = \$135000

Double Declining Balance Depreciation = Beginning Book Value x 2 times Straight line rate
For 2020 = \$800000 x 50% x 9/12 = \$300000
For 2021 = (\$800000 - 300000) x 50% = \$250000

Sum of Years Digit method = Original Value - Salvage Value) / Sum of Years x Years Remaining
For 2021 = \$720000 / 10 x 4 x 3/12 + 720000 / 10 x 3 x 9/12 = \$234000

Double Declining Balance method will result in smallest income amount.

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