Question

Asset C3PO has a depreciable base of $24.75 million and a service life of 10 years. What would the accumulated depreciation be at the end of year five under the sum-of-the-years' digits method? (Do not round intermediate calculations.)

$6.75 million.

None of these answer choices are correct.

$12.38 million.

$18.00 million.

Answer 1

Depreciable Base = $24.75 million
Useful Life = 10 years

Sum of years’ digits = 1 + 2 + 3 + ... + 10
Sum of years’ digits = 55

Depreciation, Year 1 = $24.75 million * 10/55
Depreciation, Year 1 = $4.50 million

Depreciation, Year 2 = $24.75 million * 9/55
Depreciation, Year 2 = $4.05 million

Depreciation, Year 3 = $24.75 million * 8/55
Depreciation, Year 3 = $3.60 million

Depreciation, Year 4 = $24.75 million * 7/55
Depreciation, Year 4 = $3.15 million

Depreciation, Year 5 = $24.75 million * 6/55
Depreciation, Year 5 = $2.70 million

Accumulated Depreciation = $4.50 million + $4.05 million + $3.60 million + $3.15 million + $2.70 million
Accumulated Depreciation = $18.00 million

So, accumulated depreciation at the end of year 5 is $18.00 million