Tillman Company owns a machine that was bought on January 2, 2008, for $376,000. The machine was estimated to have a useful life of five years and a salvage value of $24,000. Tillman uses the sum-of-the-years'-digits method of depreciation. At the beginning of 2011, Tillman determined that the useful life of the machine should have been four years and the salvage value $35,200. For the year 2011, Tillman should record depreciation expense on this machine of
A) $19,200.
B) $44,400.
C) $59,200.
D) $70,400.

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method requires recalculating depreciation based on the revised useful life and salvage value. The total depreciation base is $376,000 - $35,200 = $340,800. The sum of the years' digits for four years is 10 (4+3+2+1). For 2011, the third year, the fraction is 2/10. Thus, the depreciation expense is $340,800 * (2/10) = $68,160. However, since the question asks for the depreciation expense for 2011, which is the third year, the correct calculation should be based on the remaining life after the change, which is 1 year left (since 2011 is the last year), so the correct expense is $59,200.

Tillman Company Owns a Machine That Was Bought on January