Question

The corporation purchased a machine for 1 million. Freight and installation charges amounted to 3% of the purchase price. If the machine shall be depreciated over a period of 8 years with a salvage value of 12%. Determine the depreciation charged during the 5^th year using the sum of the years digit method

Answer 1

Answer:

Depreciation charged during the 5^th year using the sum of the years digit method = 101111.

Explanation:

Computation of Depreciation expense using sum of year digit methods:

Sum of year digit = n(n+1) / 2

= 8 (8+1) / 2

= 36

Cost of the machine = 1000000 + 1000000 x 3%

= 1000000 + 30000

= 1030000

Salvage value = 1000000 x 12% = 120000

Depreciation Expense in the year 5 = (Cost of the machine - salvage value) x Remaining useful life / sum of year digit

= (1030000 - 120000) x 4 / 36

= 910000 x 4/36

= 101111