Computing Som-of the Year- Degits Depreciation The company acquired a machine on

Question

Computing Som-of the Year- Degits Depreciation The company acquired a machine on January 1 at an original cost of $115,000. the machine estimated residual value is $20,000 and its estimated life is five years. Assume that the company uses sum-of-the-years-digits depreciation. Compute depreciation expense for each year of the machine's 5-year. Round your answers to the nearest whole dollar. Compute book value at the end of each Machine's 5-years life. Round your answers to the nearest whole dollar.

Explanation / Answer

Cost of asset = 115000

Residual value = 20000

Depreciation basis =95000

Sum of the year’s digits =1+2+3+4+5

                                                = 15

Year

Depreciation basis

Factor

Depreciation

Accumulated depreciation

1

95000

5/15

$31,667

$31,667

2

95000

4/15

$25,333

$57,000

3

95000

3/15

$19,000

$76,000

4

95000

2/15

$12,667

$88,667

5

95000

1/15

$6,333

$95,000

Book value = Cost of asset – accumulated depreciation

Year

Cost of asset

Accumulated depreciation

Boom value

1

115000

$31,667

$83,333

2

115000

$57,000

$58,000

3

115000

$76,000

$39,000

4

115000

$88,667

$26,333

5

115000

$95,000

$20,000

Year

Depreciation basis

Factor

Depreciation

Accumulated depreciation

1

95000

5/15

$31,667

$31,667

2

95000

4/15

$25,333

$57,000

3

95000

3/15

$19,000

$76,000

4

95000

2/15

$12,667

$88,667

5

95000

1/15

$6,333

$95,000

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