Cullumber Company purchased a piece of equipment at the beginning of 2014. The e

Question

Cullumber Company purchased a piece of equipment at the beginning of 2014. The equipment cost $493,920. It has an estimated service life of 8 years and an expected salvage value of $83,160. 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 $57,050 will be depreciated for a particular calendar year.

Determine for what particular year the depreciation amount for this asset will be $57,050.

Explanation / Answer

Determine for what particular year the depreciation amount for this asset will be $57,050.

Sum of year digit = 8+7+6+5+4+3+2+1 = 36

Depreciation base = 493920-83160 = 410760

First year dep = 410760*8/36 = 91280

Second year dep = 410760*7/36 = 79870

Third year dep = 410760*6/36 = 68460

Fourth year dep = 410760*5/36 = 57050

so in the 4th year the depreciation amount for this asset will be $57050.

Year of depreciation is 4th year

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