Using the sum-of-the years'-digits method, depreciation for 2014 and book value at December 31, 2014, would be
A)$13,500 and $13,500.
B)$13,500 and $8,500.
C)$12,000 and $17,000.
D)$12,000 and $12,000.

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method is a type of accelerated depreciation that front-loads the majority of the depreciation expense early in the life of the asset.

To calculate the depreciation expense for 2014, we first need to find the total number of years of useful life remaining for the asset. The asset was purchased in 2012, so at the beginning of 2014, it had 7 years of useful life remaining (10 - 3 = 7).

Next, we need to calculate the sum of the digits for the useful life of the asset. This is done by adding together the digits of the remaining years of useful life, counting down from the highest digit for the first year of useful life. For example, in 2014, the highest digit would be 7, and the sum of the digits would be:

7 + 6 + 5 + 4 + 3 + 2 + 1 = 28

Finally, we can calculate the depreciation expense for 2014 by dividing the remaining useful life of the asset by the sum of the digits, and then multiplying by the cost of the asset (less any salvage value). So in this case:

Depreciation expense for 2014 = (7/28) x ($60,000 - $4,000) = $12,000

To calculate the book value at December 31, 2014, we simply subtract the total accumulated depreciation (including the amount for 2014) from the cost of the asset:

Book value at December 31, 2014 = $60,000 - ($4,000 + $12,000) = $44,000

Therefore, the correct answer is C) $12,000 and $17,000.

Using the Sum-Of-The Years'-Digits Method, Depreciation for 2014 and Book