Zenith Corporation bought a machine on January 1,2014.In purchasing the machine,the company paid $40,000 cash and signed an interest-bearing note for $105,000.The estimated useful life of the machine is five years,after which time the salvage value is expected to be $10,000.Given this information,how much depreciation expense would be recorded for the year ending December 31,2015,if the company uses the sum-of-the-years'-digits depreciation method?
A) $45,000
B) $36,000
C) $40,000
D) $34,000

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation rate using the sum-of-the-years'-digits method:
SYD = 5+4+3+2+1 = 15
Year 1: 5/15 * ($40,000 + $105,000) = $21,667 (depreciation expense)
Year 2: 4/15 * ($40,000 + $105,000) = $18,333 (depreciation expense)
Therefore, the total depreciation expense for the year ending December 31, 2015 is $21,667 + $18,333 = $40,000. Thus, the correct answer is (C).

Zenith Corporation Bought a Machine on January 1,2014