A fleet of limousines purchased by Hurst Industries is expected to last 5 years. The purchase price was $1,101,406. Shipping costs were $24,230 and initial setup charges were $37,447. The trade-in value is $77,098. Using the sum-of-the-years' digits depreciation method, calculate the accumulated depreciation at the end of year 2.
A) $651,591
B) $511,492
C) $289,596
D) $868,788

Question

Quizplus · Accepted Answer

The total depreciable amount is $1,101,406 + $24,230 + $37,447 - $77,098 = $1,085,985. The sum of the years' digits for 5 years is 15 (5+4+3+2+1). For year 1, depreciation is (5/15) * $1,085,985 = $361,995. For year 2, depreciation is (4/15) * $1,085,985 = $289,596. Accumulated depreciation at the end of year 2 is $361,995 + $289,596 = $651,591.

A Fleet of Limousines Purchased by Hurst Industries Is Expected