Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.
-Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be:
A) $18,000 and $27,000.
B) $16,000 and $29,000.
C) $16,000 and $24,000.
D) $18,000 and $22,000.

Question

Archie Co. purchased a framing machine for $45,000 on January 1, 2018. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years. 
-Using the sum-of-the-years'-digits method, depreciation for 2018 and book value at December 31, 2018, would be:
A) $18,000 and $27,000.
B) $16,000 and $29,000.
C) $16,000 and $24,000.
D) $18,000 and $22,000.

Quizplus · Accepted Answer

Depreciation in 2018 = ($45,000 - 5,000) × 4/10 = $16,000
Book value, 12/31/2018 = $45,000 - 16,000 = $29,000

Archie Co Purchased a Framing Machine for $45,000 on January 1