Question

Archie Co. purchased a framing machine for $62,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.

Using the sum-of-the-years'-digits method, depreciation for 2021 and book value at December 31, 2021, would be

Answer 1

• Working

A	Cost	$            62,000.00
B	Residual Value	$              5,000.00
C=A - B	Depreciable base	$            57,000.00
	Sum of digits [4 years = 1+2+3+4= 10]	10

• Depreciation for 2021 [Year 1] = $ 57,000 x 4/10 = $ 22,800
• Book value at 31 Dec 2021 = ($62000 – 22800) = $ 39,200