On April 1, 2013, Verlin Co. purchased new machinery for $300,000. The machinery has an estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method. The accumulated depreciation on this machinery at March 31, 2015, should be

Question

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The sum-of-the-years'-digits method is calculated as follows:

First, calculate the sum of the digits. For a five-year useful life, the sum of the digits is: 5 + 4 + 3 + 2 + 1 = 15.

Next, determine the fraction each year's depreciation represents. In year 1, the fraction is 5/15, in year 2 it is 4/15, in year 3 it is 3/15, and so on.

Finally, apply each year's fraction to the depreciable amount (which is the original cost minus the salvage value, if any) to get the annual depreciation amount.

In this case, the depreciable amount is $300,000 (assuming no salvage value). Using the sum-of-the-years'-digits method, the depreciation for each year is:

Year 1: (5/15) x $300,000 = $100,000
Year 2: (4/15) x $300,000 = $ 80,000
Year 3: (3/15) x $300,000 = $ 60,000
Year 4: (2/15) x $300,000 = $ 40,000
Year 5: (1/15) x $300,000 = $ 20,000

Therefore, the accumulated depreciation after 2 years (as of March 31, 2015) would be $100,000 + $80,000 + $60,000 = $240,000. However, we want the accumulated depreciation as of March 31, 2015, so we need to add one more year of depreciation.

Year 3: (3/15) x $300,000 = $ 60,000

Accumulated depreciation as of March 31, 2015 = $240,000 + $60,000 = $300,000.

Therefore, the correct answer is B) $180,000.