Question

# On January 1, 2015, a machine was purchased for \$90,900. The machine has an estimated salvage...

On January 1, 2015, a machine was purchased for \$90,900. The machine has an estimated salvage value of \$6,060 and an estimated useful life of 5 years. The company closed its books on December 31. Assume a fiscal year-end of September 30. Compute the annual depreciation charges over the asset’s life applying the following methods. (Round answers to 0 decimal places, e.g. 45,892.)

Year Sum-of-the-years'-digits method

2015 - Answer is \$ 21210

2016

2017

2018

2019

2020

#### Homework Answers

Answer #1

Salvage value = \$6,060

Cost = \$90,900

sum of year digit is one of the method for calculating depreciation

Total sum of year of useful life = 5+4+3+2+1 =15

Depreciable asset cost = cost-salvage value

=\$90,900-6,060

=\$84,840

For the year 2015 depreciation would be calculated for 9 months (Jan-September)

 Year Depreciation Base Remaining useful life Depreciation fraction depreciation Book Value 1 \$84,840 5 5/15 \$21,210[\$84,840*5/15]/12*9 \$69,690[\$90,900-21,210] 2 \$84,840 4 4/15 \$22,624[\$84,840*4/15] \$47,066[69,690-22,624] 3 \$84,840 3 3/15 \$16,968[\$84,840*3/15] \$30,098[47,066-16,968] 4 \$84,840 2 2/15 \$11,312[\$84,840*2/15] \$18,786 5 \$84,840 1 1/15 \$12,726 [\$18,786-6,060] \$6,060

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