Question

On January 1, 2021, Canseco Plumbing Fixtures purchased equipment for $70,000. Residual value at the end of an estimated 7 year service life is expected to be $42,000. The company expects the equipment to operate for 20,000 hours.

Required:
b. Calculate depreciation expense for 2021 and 2022 using sum-of-the-years’-digits assuming the equipment was purchased on March 31, 2021.

Answer 1

solution b) Total depreciable value = 5 = cost price - strop value 70000 - 42000 28000 Sum of useful le year = 7+6 +5+4+3+2+1=28 Depreceation of 2021 = depreciable value x 768 = 28000 x 7/28 = 7000 Depreciation from pst Arp to 31st Dec 2021 =7000 89/12 = 5250 Depreciation of 2022 = depreciable value X 6/28 = 28000 X 6128 = 6000