Question

A small delivery truck was purchased on January 1 at a cost of $25,000. It has an estimated useful life of four years and an estimated salvage value of $5,000. Prepare a depreciation schedule showing the depreciation expense, accumulated depreciation, and book value for each year under the sum of years digit method. Accum. depr. end of Yr. 2:$14,000

Answer 1

	CALCULATION OF THE DEPRECIATION AS PER SUM OF DIGITS METHOD
	Purchase Cost of Machine	$                      25,000
	Less: Salvage Value	$                        5,000
	Net Value for Depreciation	$                      20,000
	SUM OF DIGITS = 1+2+3+4 = 10 Gigits
	Depreciation for the year 1 = $ 20,000 * 4 / 10 =	$                        8,000
	Depreciation for the year 2 = $ 20,000 * 3 / 10 =	$                        6,000
	Depreciation for the year 3 = $ 20,000 * 2 / 10 =	$                        4,000
	Depreciation for the year 3 = $ 20,000 * 1 / 10 =	$                        2,000
	DEPRECIATION SCHEDULE
Year		Depreciation Amount	Accumulated Depreciation	Purchase Price	Book Value
1	Depreciation for the year 1	$                        8,000	$                8,000	$              25,000	$                17,000
2	Depreciation for the year 2	$                        6,000	$             14,000	$              25,000	$                11,000
3	Depreciation for the year 3	$                        4,000	$             18,000	$              25,000	$                   7,000
4	Depreciation for the year 4	$                        2,000	$             20,000	$              25,000	$                   5,000