Already posted this but the answer someone posted to the straight line method wa

Question

Already posted this but the answer someone posted to the straight line method was wrong.(I got $48,125) Im having trouble with the sum of the years digits.

Buckeye Company purchased a machine on January 1, 2011. The machine had a cost of $260,000 with a $10,000 residual value. The estimated useful life of the machine was eight years. On January 1, 2013, due to technological innovations, the estimated useful life was reduced by two years from the original life and the residual value was reduced by 50%. The company also decided to switch to the sum of the year's digits rather than the method they have used up to this point (straight-line depreciation).
A) prepare the journal entry to record the annual depreciation on December 31, 2013.

B) what would the entry be if the company continued to utilize the straight line method?

Explanation / Answer

Annual depreciation = Cost of machine - residual value / number of years Cost of machine $     260,000 Residual value $       10,000 $     250,000 Number of years 8 Annual depreciation $       31,250 Accumulated depreciation at year 2 $       62,500 Book value at year 12/31/2012 $     197,500 Residual value after technological change $         5,000 Annual depreciation for rest 4 years would be $       48,125 12/31/2013 Depreciation expense $       48,125                        Acccumulated depreciation $48,125 Calculation of Sum of years digit (n / n x (n+1)) x Annual depreciation = 4/20*48125 $           9,625 12/31/2013 Depreciation expense $           9,625                        Acccumulated depreciation $ 9,625

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