Orange Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2005 and the machine was placed in service at the beginning of 2006. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $4 million. At the beginning of 2009, Orange decided to change to the straight-line method. Ignoring income taxes, what will be Orange's depreciation expense for 2009?

Question

Quizplus · Accepted Answer

The sum-of-the-years'-digits method was used for 3 years (2006-2008). The depreciation for these years is calculated and subtracted from the depreciable base. The remaining depreciable base is then depreciated using the straight-line method over the remaining useful life.