On January 3, 2013, Salazar Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of $60,000. The depreciation applicable to this machinery was $130,000 for 2015, computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was

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Quizplus · Accepted Answer

The sum-of-the-years'-digits method for an 8-year life has a denominator of 36 (8+7+6+5+4+3+2+1). For 2015, the third year, the fraction is 6/36. The depreciation for 2015 is $130,000, so the depreciable base is $130,000 / (6/36) = $780,000. Adding the salvage value of $60,000 gives an acquisition cost of $840,000.