Question

Archie Co. purchased a framing machine for $45,000 on January 1, 2009. 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 2009 and book value at December 31, 2009 would be:

$18,000 and $27,000.

$16,000 and $29,000.

$16,000 and $24,000.

$18,000 and $22,000.

Answer 1

Answer: $16,000 and $29,000

Explanation

Sum-of-the-years’-digits = [4 (4+1)] / 2 = 10
Calculation of Depreciation under Sum-of-the-years’-digits Method
Year	Remaining estimated useful life at beginning of year	Sum-of-the- years’-digits	Applicable percentage	Annual depreciation
2009	4	4/10	40.00%	16,000.00	(45,000-5,000) * 40%
	Book value at December 31, 2009 = 45,000 - 16,000 = $ 29,000