Question

Jennings Advertising Inc. reported the following in its December 31, 2018, balance sheet:

Equipment	$	420,000
Less: Accumulated depreciation—equipment	$	157,500

    
In a disclosure note, Jennings indicates that it uses straight-line depreciation over 12 years and estimates salvage value at 10% of cost. What is the average age of the equipment owned by Jennings?

Multiple Choice

a. 3.8 years.

b. 5 years.

c. 7 years.

d. 8.2 years.

11.

Asset C3PO has a depreciable base of $26.40 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method? (Do not round intermediate calculations.)

Multiple Choice

a. $7.20 million.

b. $13.20 million.

c. $19.20 million.

Answer 1

Answer:- Straight line Method:-

Annual depreciation:-

= Cost of asset- Salvage value of asset/No. of useful life (years)

=($420000-$42000)/12 years

=$378000/12 years = $31500

The average age of the equipment owned by Jennings= Accumulated depreciation/Annual depreciation

=$157500/$31500

=5 years

11)-The accumulated depreciation be at the end of year five under the sum-of-the-years' digits method would be :-($4.8+4.32+3.84+3.36+2.88)

=$19.20 million

Explanation:-

Sum of the years digits=Depreciable base*Remaining useful life/sum of the years digits

           

Sum of the Years' Digits = 1+2+3+4+5+6+7+8+9+10= 10(10 + 1) ÷ 2 = 55

Depreciable Base ($ in million) = $26.40

Year 1= $26.40 *10/55 = $4.8

Year 2= $26.40 *9/55 = $4.32

Year 3= $26.40 *8/55 = $3.84

Year 4= $26.40 *7/55 = $3.36

Year 5= $26.40 *6/55 = $2.88