Broadway Ltd. purchased equipment on 1/1/07 for $800,000, estimating a five-year useful life and no residual value. In 2007 and 2008, Broadway depreciated the asset using the straight-line method. In 2009, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2009 on this equipment?
A)$120,000.
B)$160,000.
C)$200,000.
D)$240,000.The depreciation for 2007 and 2008 was: $800,000 5 = $160,000 per year.This leaves a book value of $480,000 ($800,000 320,000) and three years remain in the asset's life.Under SYD, the remaining depreciable base would be multiplied by 3 (1 + 2 + 3) for 2010, or 3/6 $480,000 = $240,000 in depreciation.

Question

Quizplus · Accepted Answer

The depreciation for 2007 and 2008 was calculated as $160,000 per year using the straight-line method. In 2009, Broadway changed to sum-of-years'-digits depreciation. The remaining depreciable base is $480,000 ($800,000 - $320,000) for three years of remaining useful life. Applying the sum-of-years'-digits depreciation method, the depreciation for 2009 would be 3/6 x $480,000 = $240,000. Therefore, the best choice is D.