On January 1, 2010, Frommer, Inc.purchased an asset for $32, 000.It was estimated that the asset life was seven years, after which it would have a residual value of $2, 100.Assuming the use of the sum-of-the-years'-digits method, depreciation expense for 2010 would be
A)$4, 271
B)$7, 475
C)$8, 000
D)$8, 543

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method involves calculating the depreciation expense by multiplying the depreciable base by a fraction. The depreciable base is the cost minus the residual value ($32,000 - $2,100 = $29,900). The sum of the years' digits for 7 years is 28 (7+6+5+4+3+2+1). For the first year, the fraction is 7/28. Therefore, the depreciation expense for 2010 is $29,900 * (7/28) = $7,475.