Red Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $4 million. At the beginning of 2018, Red decided to change to the sum-of-the-years'-digits method. Ignoring income taxes, what will be Red's depreciation expense for 2018?
A) $4.80 million.
B) $5.40 million.
C) $6.60 million.
D) $11.55 million.

Question

Quizplus · Accepted Answer

A change in depreciation 11ea937b_358a_ca2d_a419_f735239b74f7_TB2599_00 Calculation of straight-line depreciation to date
($70 - 4) ÷ 10 years = $6.6 × 3 years = $19.8
Adjusting entry (2018 depreciation): 11ea937b_358a_ca2e_a419_7b249c3744cc_TB2599_00 Calculation of SYD depreciation 11ea937b_358a_ca2f_a419_2fe7150516f5_TB2599_00 *n (n + 1) ÷ 2 = 7 (8) ÷ 2 = 28

Red Corp Constructed a Machine at a Total Cost of $70