On January 1, 2011, Carson Company purchased equipment at a cost of $570,000. The equipment was estimated to have a useful life of five years and a salvage value of $60,000. Carson uses the sum-of-the-years'-digits method of depreciation. What should the accumulated depreciation be at December 31, 2013?
A) $340,000
B) $408,000
C) $456,000
D) $510,000

Question

Quizplus · Accepted Answer

To calculate the accumulated depreciation using the sum-of-the-years'-digits method, follow these steps:

Step 1: Determine the total number of years of useful life. In this case, it's 5.

Step 2: Calculate the sum of the digits for the years of useful life. This is done by adding up the digits from 1 to 5, which equals 15.

Step 3: Determine the depreciation expense for each year. This is done by dividing the remaining useful life (in years) by the sum of the digits. In the first year, the remaining useful life is 5, so the depreciation expense is 5/15 of the total depreciable amount ($570,000 - $60,000), or $170,000. In the second year, the remaining useful life is 4, so the depreciation expense is 4/15 of the total depreciable amount, or $136,000. In the third year, the remaining useful life is 3, so the depreciation expense is 3/15 of the total depreciable amount, or $102,000.

Step 4: Add up the depreciation expense for all three years. $170,000 + $136,000 + $102,000 = $408,000.

Therefore, the accumulated depreciation at December 31, 2013 should be $408,000.

On January 1, 2011, Carson Company Purchased Equipment at a Cost