Question

Sorter Company purchased equipment for $120,000 on January 2, 2019. The equipment has an estimated service life of 8 years and an estimated residual value of $12,000.
Required:
Compute the depreciation expense for 2019 under each of the following methods:

a. Straight-line
b. Sum-of-the-years'-digits
c. Double-declining-balance

Answer 1

Answer:

$13,500

$24,000

$30,000

Explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($120,000 - $12,000) / 8 = $13,500

the depreciation expense each year would be $13500

b. Sum-of-the-year digits = (remaining useful life / sum of the years ) x  (Cost of asset - Salvage value)

Sum of the years = 1 +2 +3 +4 + 5 + 6 + 7 + 8 = 36

Remaining useful life = 8

(8/36) x ($120,000 - $12,000) = $24,000

c. Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2/8 = 0.25

0.25 x $120,000 = $30,000