Murgatroyd Co. purchased equipment on January 1, 2016, for $500,000, estimating a four-year useful life and no residual value. In 2016 and 2017, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2018, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2018 on this equipment?

Question

Quizplus · Accepted Answer

The depreciation for 2016 was: $500,000 × 4/10 = $200,000.
The depreciation for 2017 was: $500,000 × 3/10 = $150,000.
This leaves a book value of $150,000 ($500,000 - 350,000), so that the new depreciation would be $75,000 ($150,000 ÷ 2).