Question

In: Accounting

A machine that cost $68,616 on January 1, 2014 was depreciated by Ava Company using the straight line method.

A machine that cost $68,616 on January 1, 2014 was depreciated by Ava Company using the straight line method. The machine had no residual value and a useful life of 8 Years. On January 1. 2017, the company switched to the sum of years’-digits method.

What is the depreciation expense for the year ended December 31, 2017 $____

Expert Solution

Step-1:Calculation of Book Value of Machine as on January 1, 2017

Cost of Machine

$ 68,616

Accumulated depreciation

$ 25,731

Book Value of Machine as on January 1, 2017

$ 42,885

Working:

# 1

Straight Line Depreciation

=

(Cost-Salvage Value)/Useful life

=

(68616-0)/8

=

$ 8,577

# 2

Accumulated depreciation

=

$ 8,577

*

3

(From January 1, 2014 to January 1, 2017)

=

$ 25,731

Step-2:Calculation of depreciation for Year ended December 31, 2017

Depreciable Value

=

$ 42,885

Sum of the year's digit

=

1+2+3+4+5

=

15

(After 3 years, remaining life is 5 years)

Depreciation for Year ended December 31, 2017

=

42885*(5/15)

=

$ 14,295

Thus,

Depreciation expense for the year ended December 31, 2017

$ 14,295

ekkarill92 answered 3 years ago

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