In: Accounting
On April 20, 2016, Maskell Co. purchased an asset costing $66,000 with a useful life of 9 years and a residual value of $6,000. The company uses the sum-of-the-years'-digits depreciation.
Required:
Compute depreciation expense for 2016 using the
a. nearest whole month method
b. nearest whole year method
c. half-year convention method
Answer:-Depreciation expense for 2016 using the:-
a)- nearest whole month method ={[($66000-$6000)*8 months/12 months]*9/45}
=($40000*9/45) = $8000
b)- nearest whole year method = ($66000-$6000)*9/45
=($60000*9/45) = $12000
c)- half year convention method ={[($66000-$6000)*9/45]*1/2}
=($12000*1/2) = $6000
Where:- Sum of the years digits=Depreciable base*Remaining useful life/sum of the years digits
Sum of the Years' Digits = 1+2+3+4+5+6+7+8+9 = 9(9+ 1) ÷ 2 = 45
Depreciable Base =Assets value-residual value