On September 19, 2010, McCoy Co.purchased machinery for $190,000.Residual value was estimated to be $10,000.The machinery will be depreciated over eight years using the sum-of-the-years'-digits method.If depreciation is computed on the basis of the nearest full month, McCoy should record depreciation expense for 2011 on this machinery of

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method allocates the largest depreciation expense to the first year of the asset's life. The sum of the digits for an eight-year asset is 36 (8 + 7 + 6 + 5 + 4 + 3 + 2 + 1). Depreciation for 2011, the second year of the asset's life, is $38,750 [($190,000 - $10,000) x (8/36)].