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

Business   Accounting   
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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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