Question

In: Accounting

Cutter Enterprises purchased equipment for $102,000 on January 1, 2018. The equipment is expected to have...

Cutter Enterprises purchased equipment for $102,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,600.

Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be: (Do not round depreciation rate per year)

Multiple Choice

  • $25,440 and $44,760 respectively.

  • $25,440 and $38,160 respectively.

  • $27,200 and $40,800 respectively.

  • $27,200 and $34,200 respectively.

Solutions

Expert Solution

Given,
Cost of Equipment is $102,000.
Residual Value is $6,600
Useful Life is 5 years
Depreciable Value = Cost of Equipment - Residual Value
Depreciable Value = $102,000 - $6,600
Depreciable Value = $95,400
Sum of years’ digits = 5 + 4 + 3 + 2 + 1
Sum of years’ digits = 15
Depreciation for the year 2018 = $95400 * 5/15
Depreciation for the year 2018 = $31,800
Book Value at end of 2018 = Cost of the asset - Depreciation for 2018
Book Value at end of 2018 = $102,000 - 31,800
Book Value at end of 2018 = $70,200
Depreciation for the year 2019 = $95,400 * 4/15
Depreciation for the year 2019 = $25,440
Book Value at end of 2019 = Book value at end of 2018 - Depreciation for 2019
Book Value at end of 2019 = $70,200 - $25,440
Book Value at end of 2019 = $44,760
Hence, the correct option is $25,440 and $44,760 .

Related Solutions

Cutter Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have...
Cutter Enterprises purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $3,600. Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be: (Do not round depreciation rate per year)
Cutter Enterprises purchased equipment for $96,000 on January 1, 2018. The equipment is expected to have...
Cutter Enterprises purchased equipment for $96,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $4,500. Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be?
1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to...
1. Cutter Enterprises purchased equipment for $72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000. Using the sum-of-the-years'-digits method, depreciation for 2019 and book value at December 31, 2019, would be: Multiple Choice $19,200 and $30,800 respectively. $19,200 and $28,800 respectively. $17,600 and $26,400 respectively. $17,600 and $32,400 respectively. 2. Cutter Enterprises purchased equipment for $66,000 on January 1, 2018. The equipment is expected to have a five-year life...
Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have...
Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,000. Using the straight-line method, depreciation for 2022 and the equipment's book value at December 31, 2022, would be: Multiple Choice $14,400 and $43,200 respectively. $13,200 and $39,600 respectively. $13,200 and $45,600 respectively. $28,800 and $37,200 respectively.
Cutter Enterprises purchased equipment for $96,000 on January 1, 2021. The equipment is expected to have...
Cutter Enterprises purchased equipment for $96,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,600. Using the double-declining-balance method, the book value at December 31, 2022, would be: Multiple Choice a) $19,200. b) $34,560. c) $35,760. d) $33,660.
Cutter Enterprises purchased equipment for $60,000 on January 1, 2021. The equipment is expected to have...
Cutter Enterprises purchased equipment for $60,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $5,400. Using the double-declining-balance method, the book value at December 31, 2022, would be:
Fawkes Enterprises purchased equipment for $196,000 on January 1, 2021. The equipment is expected to have...
Fawkes Enterprises purchased equipment for $196,000 on January 1, 2021. The equipment is expected to have a 7-year life and a residual value of $14,000. Fawkes uses the sum-of-the-years'-digits method to calculate depreciation. What amount of depreciation would Fawkes record in 2021 and 2022? What is the book value of the equipment on December 31, 2021 and December 31, 2022?
Kansas Enterprises purchased equipment for $60,000 on January 1, 2015. The equipment is expected to have...
Kansas Enterprises purchased equipment for $60,000 on January 1, 2015. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. (1) Using the straight-line method, depreciation expense for 2015 would be: $    (2) Using the double-declining balance method, depreciation expense for 2016 would be: $    7 / 10 4. Crestview Estates purchased a tractor on January 1, 2015, for $65,000. The tractor’s useful life is estimated to...
kansas enterprises purchased equipment for 81,500 on January 1,2021. the equipment is expected to have a...
kansas enterprises purchased equipment for 81,500 on January 1,2021. the equipment is expected to have a five - year service life, with a residual value of 8,250 at the end of five years. using the double- declining balance method, depreciation expense for 2021 would be
Bolton, Inc. purchased equipment for $87,000 on January 1, 2018. The equipment is expected to have...
Bolton, Inc. purchased equipment for $87,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $7,800. Using the double-declining balance method, depreciation for 2019 would be:
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT