Question

The Cardwell Company purchased a machine on January 2, 2016, at a cost of $1,200,000. The machine had an estimated useful life of eight years and a residual value of $120,000. Cardwell computes depreciation by the sum-of-the-years'-digits method. What amount, net of accumulated depreciation will appear on the company's December 31, 2018, balance sheet for this machine?

Answer 1

Answer:

Book value 2018= $450,000

Explanation:

Giving the following information:

The Cardwell Company purchased a machine on January 2, 2016, for $1,200,000. The machine had an estimated useful life of eight years and a residual value of $120,000. Cardwell computes depreciation by the sum-of-the-years'-digits method.

Depreciable amount= 1,200,000 - 120,000= 1,080,000

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

Depreciation year 1= (8/36)*1,080,000= 240,000

Depreciation year 2= (7/36)*1,080,000= 210,000

Depreciation year 3= (6/36)*1,080,000= 180,000

Book value= 1,080,000- 630,000= $450,000