Question

Archie Co. purchased a framing machine for $55,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $2,000 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:________ (Do not round intermediate calculations.)
a) $16,500 and $16,500 respectively.
b) $16,500 and $14,500 respectively.
c) $15,900 and $17,900 respectively.
d) $15,900 and $15,900 respectively.

Answer 1

Answer:

c) $15,900 and $17,900 respectively.

Explanation:

First calculate the Sum of all years digits  

Sum of all years digits = 4 + 3 + 2 + 1 = 10

Now calculate the Depreciation rate using following formula

Depreciation rate = Remaining useful life / Sum of years digits

2021

Depreciation Rate = 4 / 10 = 0.40 = 40%

2022

Depreciation Rate = 3 / 10 = 0.30 = 30%

2023

Depreciation Rate = 2 / 10 = 0.20 = 20%

2024

Depreciation Rate = 1 / 10 = 0.10 = 10%

The depreciation schedule is attached. Please find it.

On December 31, 2022 the depreciation expense is $15,900 and Ending Book Value is $17,900

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