Question

B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2018. The change affects machinery purchased at the beginning of 2016 at a cost of $84,900. The machinery has an estimated life of five years and an estimated residual value of $4,245. What is B's 2018 depreciation expense?

Multiple Choice

$10,754.

$22,640.

$21,508.

$16,131.

Answer 1

Correct answer is		$ 10,754
B's Depreciation for 2018 is		$ 10,754
Depreciation Prior to change
Sums of the years digit depreciation =
2016 Depreciation		$ 26,885
2017 Depreciation		$ 21,508
Accumulated Depreciation		$ 48,393
As per Straight Line Depreciation
Asset's Depreciable Cost		$ 80,655
Accumulated Depreciation to date (calculated above)		$ 48,393
Undepreciated Cost on Jan 1, 2018		$ 32,262
Remaining Life		3 years
Annual Straight Line Depreciation		$ 10,754