Please solve for C.Sum of digits
Homework Answers
Information:
Cost of Computer = $155,000
Life of Computer 10 Years
Salvage Value = $25,000
Depreciable Cost (Base) = Computer Cost - Salvage Value = $155,000 - $25,000 = $130,000
Depreciation Expense = (Remaining useful Life Sum of
years' Digits)
Depreciable
Base
Depreciation for 1 Year = (10 55)
130,000 = $23,636
Book Value at the end of 1 Year = $155,000 - $23636 = $131,364
Depreciation for 2 Year = (9 55)
130,000 = 21,273
Depreciation for 3 Year = (8 55)
130,000 =18,909
Depreciation for 4 Year = (7 55)
130,000 =16,545
Depreciation for 5 Year = (6 55)
130,000 = 14182
Depreciation expense for 6 Year = (5 55)
130,000 = $11,818 and
Book Value at the end of 6th Year = $48,637 or 48,636
| Year | Dep. Base | Remaining life | Dep. Fraction | Dep. Expense | Book Value |
| 1 | $130,000 | 10 | 10/55 | $23,636 | $131,364 |
| 2 | 9 | 9/55 | 21,273 | 110,091 | |
| 3 | 8 | 8/55 | 18,909 | 91,182 | |
| 4 | 7 | 7/55 | 16,545 | 74,637 | |
| 5 | 6 | 6/55 | 14182 | 60,455 | |
| 6 | 5 | 5/55 | 11818 | 48,637 | |
| 7 | 4 | 4/55 | |||
| 8 | 3 | 3/55 | |||
| 9 | 2 | 2/55 | |||
| 10 | 1 | 1/55 |
* Sum of digits = 10 +9+8+7+6+5+4+3+2+1 = 55
Note:Sum of digits depreciation method charges higher depreciation expense in earlier years because the assets are more productive and efficient as compared to following years.
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accumulated depreciation for the first three years of the asset’s
life under the straight-line method, the sum-of-the-years’-digits
method, and the double-declining-balance method.
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On July 1, 2020, Novak Company purchased for $5,040,000
snow-making equipment having an estimated useful life of 5 years
with an estimated salvage value of $210,000. Depreciation is taken
for the portion of the year the asset is used.
Complete the form below by determining the depreciation expense
and year-end book values for 2020 and 2021 using the
1.
sum-of-the-years'-digits method.
2.
double-declining balance method.
2020
2021
Sum-of-the-Years'-Digits Method
Equipment
$5,040,000
$5,040,000
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