Sandhill Ltd. purchased machinery on January 1, 2017, for $36,800. The machinery

Question

Sandhill Ltd. purchased machinery on January 1, 2017, for $36,800. The machinery is estimated to have a residual value of $3,800 after a useful life of eight years.

Calculate the 2017 depreciation expense using the sum-of-the-years'-digits method. (Do not round intermediate calculation and round answer to 0 decimal places, e.g. 5,275.)

Depreciation Expense $_______________

Calculate the 2017 depreciation expense using the sum-of-the-years'-digits method, but assuming the machinery was purchased on April 1, 2017. (Do not round intermediate calculation and round answer to 0 decimal places, e.g. 5,275.)

Depreciation Expense $__________________

Explanation / Answer

Depreciation under the sum-of-the-years-digits method = (cost - residual value) * number of years left / [n(n+1)/2]

Cost = 36,800

Residual value = 3,800

n(n+1)/2 = 8(8+1)/2 = 36

2017 depreciation expense using the sum-of-the-years'-digits method = (36,800 - 3,800) * 8/36 = 7,333

Depreciation Expense $ = 7,333

2017 depreciation expense using the sum-of-the-years'-digits method, but assuming the machinery was purchased on April 1, 2017 = (36,800 - 3,800) * 8/36 * 9/12 = 5,500

Depreciation Expense $ = 5,500.

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