Question

Asset C3PO has a depreciable base of $18.15 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.)

Multiple Choice

• $4.95 million.

• $9.07 million.

• $13.20 million.

• None of these answer choices are correct.

2.Cutter Enterprises purchased equipment for $99,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,900.

Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be:

Multiple Choice

• $26,400 and $32,700 respectively.

• $24,560 and $36,840 respectively.

• $24,560 and $43,740 respectively.

• $26,400 and $39,600 respectively.

3.

Cutter Enterprises purchased equipment for $42,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the double-declining balance method, depreciation for 2019 would be:

Multiple Choice

• $16,800.

• $8,640.

• $10,080.

• None of these answer choices are correct.

  3.Cutter Enterprises purchased equipment for $42,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000.
  
  Using the double-declining balance method, depreciation for 2019 would be:

  Multiple Choice

• $16,800.

• $8,640.

• $10,080.

• None of these answer choices are correct.

Answer 1

1. Depreciation under sum of years digit method

Depreciation base = 18.15 million

Year	Depreciation base	Remaining life of the asset	Depreciation fraction	Depreciation expenses	Book value
1	18,150,000	10	10/55	3,300,000	14,850,000
2	18,150,000	9	9/55	2,970,000	11,880,000
3	18,150,000	8	8/55	2,640,000	9,240,000
4	18,150,000	7	7/55	2,310,000	6,930,000
5	18,150,000	6	6/55	1,980,000	4,950,000

Accumulated depreciation after 5th year is $13.20 million (3.30+2.97+2.64+2.31+1.98)

Depreciation fraction=10+9+8+7+6+5-4+3+2+1=55

2. Depreciation base = cost of thes asset - salvage value

=99,000-6,900= $92,100.

Useful life =5 years

Year	Depreciation base	Remaining life	Depreciation fraction	Depreciation expenses	Book value
1	92,100	5	5/15	30,700	61,400
2	92,100	4	4/15	24,560	36,840

Depreciation fraction = 6+4+3+2+1=15

Depreciation for 2019 is $24,560 and book value is $36,480.

3. Double Declining balance method

Double Declining balance formula = 2× cost of the asset× depreciation value

Here it is (1/5)×100 = 20%

20%×2=40%

Depreciation base=42,000.

Depreciation for 2018 = 42,000×40%= 16,800

Book value at the end of the year =42,000-16,800= 25,200.

Depreciation for 2019 =25,200×40% = $10,080.

Not : in the problem, question 3 is repeated twice.

____×____

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