Question

Archie Co. purchased a framing machine for $50,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $8,000 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: (Do not round intermediate calculations.)

Answer 1

Cost of machine = $50,000

Residual value = $8,000

Depreciable cost = Cost of machine - Residual value

= 50,000 - 8,000

= $42,000

Useful life = 4 years

Annual depreciation = Depreciable cost x Number of outstanding years/Sum of years

= 42,000 x 4/10

= $16,800

Hence, depreciation for 2021 = $16,800

Book value at December 31, 2021, would be = Cost of machine - depreciation for 2021

= 50,000 - 16,800

= $33,200

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