On January 1, 2000, Barnes Company purchased equipment at a cost of $50,000.The equipment was estimated to have a salvage value of $5,000 and it is being depreciated over eight years under the sum-of-the-years'-digits method.What should be the charge for depreciation of this equipment for the year ended December 31, 2007?

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method calculates depreciation based on a fraction of the depreciable amount. For an 8-year life, the sum of the years' digits is 36 (1+2+3+4+5+6+7+8). In 2007, the last year, the fraction is 1/36. The depreciable amount is $45,000 ($50,000 cost - $5,000 salvage value). Thus, the depreciation for 2007 is $45,000 * (1/36) = $1,250.

On January 1, 2000, Barnes Company Purchased Equipment at a Cost