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On 1/1/18, Stewart bought a cement mixer for $45,000. It has a $9,000 salvage value and...

  1. On 1/1/18, Stewart bought a cement mixer for $45,000. It has a $9,000 salvage value and 5 year useful life.

    Under sum of years digits, 2019 depreciation and 12/31/19 book value are:

    A.

    $9,600 and $23,400 respectively.
    B.

    $9,600 and $14,400 respectively.
    C.

    $9,600 and $28,200 respectively.
    D.

    $12,000 and $9,000 respectively.
Business   Accounting   
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Answer #1

Sum of years digits = 5 + 4 + 3 + 2 + 1

= 15

Accumulated Depreciation = Cost - salvage value

= $45,000 - $9,000

= $36,000

2018 depreciation expense = Accumulated depreciation * (5/15)

= $36,000 * (5/15)

= $12,000

2019 depreciation expense = Accumulated depreciation * (4/15)

= $36,000 * (4/15)

= $9,600

Book value at the end of the year 2019

= Cost - 2018 depreciation expense - 2019 depreciation expense

= $45,000 - $12,000 - $9,600

= $23,400

$9,600 ad $23,400 is the correct answer

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