Cummings corporation purchased a machine that cost $82,653, on terms of 2/10, net/30. The invoice price was paid in full 20 days after the purchase date. The machine has an estimated useful life of 3 years and a residual value of $9,000. What is the amortization expense in the second year, assuming SYD amortization?

Question

Quizplus · Accepted Answer

The first step is to calculate the depreciable cost:

Purchase price - Residual value = Depreciable cost

$82,653 - $9,000 = $73,653

Next, calculate the sum of the years' digits:

3 + 2 + 1 = 6

For the second year, the fraction to be applied to the depreciable cost is:

2 / 6 = 0.33

Therefore, the amortization expense for year two is:

$73,653 x 0.33 = $24,350

However, since this is an SYD calculation, we also need to take into account the previous year's amortization expense:

Year 1 amortization expense = ($73,653 x 3/6) = $36,827

So the total amortization expense for year two is:

$24,350 + $36,827 = $61,177

Therefore, the correct answer is B) $24,551.

Cummings Corporation Purchased a Machine That Cost $82,653, on Terms