Question

Required information (The following information applies to the questions displayed below.) On January 1, 2021, the Allegheny Corporation purchased equipment for $355,000. The estimated service life of the equipment is 10 years and the estimated residual value is $25,000. The equipment is expected to produce 300,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods can com mune 1. Sum-of-the-years-digits (Do not round Intermediate calculations. Round final answers to the nearest whole dollar amount.) Year Depreciation expense 2021 2022

Answer 1

Formula is used to calculate depreciation expense under sum-of-the-year's-digits method is:

Depreciation expense= ( Remaining useful life of the asset ÷ sum of the years digit) × Depreciable cost

Depreciable cost= cost of the equipment- estimated residual value = $355,000-$25,000 =$330,000.

Sum of the years digit= 10+9+8+7+6+5+4+3+2+1 = 55

Depreciation expense for 2021 =( $330,000×10)÷55 = $60,000

Book value at end of first year = $270,000.

Depreciation expense for 2022 = ($330,000×9)÷55= $54,000

Book value at the end of second year = $216,000.

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