Five Satins Company purchased a piece of equipment at the beginning of 2014. The

Question

Five Satins Company purchased a piece of equipment at the beginning of 2014. The equipment cost $430,000. It has an estimated service life of 8 years and an expected salvage value of $70,000. The sum-of-the-years'-digits method of depreciation is being used. Someone has already correctly prepared a depreciation schedule for this asset. This schedule shows that $60,000 will be depreciated for a particular calendar year. Determine for what particular year the depreciation amount for this asset will be $60,000.

Explanation / Answer

Solution:

Cost of assets = $430,000

Salvage value = $70,000

Depreciable cost = $430,000 - $70,000 = $360,000

From above, depreciation for 2016 will be equal to $60,000

Computation of Depreciaton - Sum of digit of years Year Depreciation Base Remaining life of asset Depreciation fraction Depreciation Expense Accumlated Depreciation 2014 $360,000.00 8 8/36 $80,000.00 $80,000.00 2015 $360,000.00 7 7/36 $70,000.00 $150,000.00 2016 $360,000.00 6 6/36 $60,000.00 $210,000.00 2017 $360,000.00 5 5/36 $50,000.00 $260,000.00 2018 $360,000.00 4 4/36 $40,000.00 $300,000.00 2019 $360,000.00 3 3/36 $30,000.00 $330,000.00 2020 $360,000.00 2 2/36 $20,000.00 $350,000.00 2021 $360,000.00 1 1/36 $10,000.00 $360,000.00

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