Answer:
Depreciation Book Value
for year after year
$ $
Year 1 - 15,556 54,444
Year 2 13,611 40,833
Year 3 11.667 29,667
Year 4 9,722 19,444
Year 5 7,778 11,667
Year 6 5,833 5,833
Year 7 3,889 1,944
Year 8 1,944 0
Explanation:
Computation of yearly depreciation using sum of the years method
Cost of equipment $ 67,000
Installation cost <u>$ 3,000</u>
Depreciable cost $ 70,000
In a sum of the years method the mo of years are summed up and then depreciation is applied with the highest number first.
Sum of the years = (1+2+3+4+5+6+7+8) = 36
Depreciable basis $ 70,000
Depreciation for year 1 = 8/36* 70,000 <u> $ (15,556) </u>
Book value after year 1 $ 54,444
Depreciation for year 2 = 7/36* 70,000 <u> $ (13,611) </u>
Book value after year 2 $ 40,833
Depreciation for year 3 = 6/36* 70,000 <u> $ (11,667) </u>
Book value after year 3 $ 29,667
Depreciation for year 4 = 5/36* 70,000 <u> $ ( 9.722) </u>
Book value after year 4 $ 19,444
Depreciation for year 5 = 4/36* 70,000 <u> $ (7,778) </u>
Book value after year 5 $ 11,667
Depreciation for year 6 = 3/36* 70,000 <u> $ (5,833) </u>
Book value after year 6 $ 5,883
Depreciation for year 7 = 4/36* 70,000 <u> $ (3,889) </u>
Book value after year 7 $ 1,944
Depreciation for year 8 = 1/36* 70,000 <u> $ (1,944) </u>
Book value after year 8 $ 0
