Question

Haaland Company depreciates an asset with an original cost of $8,000 over 5 years using the...

Haaland Company depreciates an asset with an original cost of $8,000 over 5 years using the sum-of-the-years digits’ method of depreciation. The asset was purchased on July 1, 2020 and the depreciation expense for 2020 is $1,250. What is the estimated salvage value of the asset?

Multiple Choice

  • $1,000

  • $500

  • $1,250

  • $750

  • $250

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Answer #1
Correct Option B i.e. $500
Year Depreciation Expense Year Fraction Caluclation of Percentage using Fraction
2020         1,250 1 16.67% (5/15)/12*6
In year 1 : Depreciation expense of $1250 is 16.67% of depreciable value
Total deprciatiable value = 1250/16.67%
7500
Salavge value = Original cost - deprecialble value
    =8000-7500
500
Year
1
2
3
4
5
Sum of Year 15
0 0
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