Question

Archie Co. purchased a framing machine for $45,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.
Using the sum-of-the years'-digits method, depreciation for 2022 and book value at December 31, 2022, would be:
a) $13,500 and $13,500 respectively.
b) $13,500 and $8,500 respectively.
c) $12,000 and $17,000 respectively.
d) $12,000 and $12,000 respectively.

Answer 1

Answer:

$12,000 and $33,000

Explanation:

For computing the depreciation for year 2022 and the book value of the same year first we have to find out the depreciation expense for year 2021 and after that the book value which is shown below:

Depreciation expense for 2021 is

= ($45,000 - $5,000) × 4 ÷ 10

= $16,000

Now the Book value as on 1 January, 2022 is  

= $45,000 - $16,000

= $29,000

And,

Depreciation expense for 2022 is

= ($45,000 - $5,000) × 3 ÷ 10

= $12,000

Book value as on December 31, 2022  is

= $45,000 - $12,000

= $33,000

This is the answer but the same is not provided in the given options

And, the 10 is come from

= 4 + 3 + 2 + 1

= 10