Akron Incorporated purchased an asset on September 1 of Year 1 for $375,000. The estimated residual...
Akron Incorporated purchased an asset on September 1 of Year 1 for $375,000. The estimated residual value is $15,000. Akron estimates that the asset has a service life of 5 years. Calculate the depreciation for Year 1 using the sum-of-the-years'-digits method. $ Calculate the depreciation for Year 2 using the sum-of-the-years'-digits method.
Homework Answers
| Depreciation for Year 1 | 40000 | |
| Depreciation for Year 2 | 112000 | |
| Workings: | ||
| Sum-of-the-years'-digits | 15 | =5*(5+1)/2 |
| Depreciation for Year 1 | 40000 | =(375000-15000)*5/15*4/12 |
| Depreciation for Year 2: | ||
| For remaining 1st year | 80000 | =(375000-15000)*5/15*8/12 |
| For 2nd year | 32000 | =(375000-15000)*4/15*4/12 |
| Depreciation for Year 2 | 112000 |
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