20. Broadway Ltd. purchased equipment on January 1, 2014, for $840,000, estimati
ID: 2451154 • Letter: 2
Question
20.
Broadway Ltd. purchased equipment on January 1, 2014, for $840,000, estimating a 7-year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment? (Do not round your depreciation rate.)
a) $100,000
b) $120,000
c) $240,000
d) $200,000
Broadway Ltd. purchased equipment on January 1, 2014, for $840,000, estimating a 7-year useful life and no residual value. In 2014 and 2015, Broadway depreciated the asset using the straight-line method. In 2016, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2016 on this equipment? (Do not round your depreciation rate.)
a) $100,000
b) $120,000
c) $240,000
d) $200,000
Explanation / Answer
Ans-d)$200000
Purchase on 1st jan 2014 $840000
Less-depreciation for 2014 $120000(840000/7)
Balance as on 1st jan 2015 $720000
Less-depreciation for 2015 $120000(840000/7)
Balance as on 1st jan 2016 $600000
Depreciation under sum-of-years'-digits method
Sum of each year remaining life (5+4+3+2+1)15
% of depreciation =5/15
=33%
Depreciation for 2016(600000*33%)$200000
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