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Smith company purchased machinery on January 1, 2020 for 72,000. The machinery is estimated to have a salvage value of 7,200 after a useful life of 8 years.

a. Compute 2020 depreciation expense using the sum-of-the-years-digits method.

b. assuming the machinery was purchased on April 1, 2020

Respuesta :

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a) The 2020 depreciation expense using the sum-of-the-years-digits method, 36 is $14,400.

b) Assuming the machinery was purchased on April 1, 2020, the 2020 depreciation expense is $10,800.

What is the sum-of-the-years-digits method?

The sum-of-the-years-digits method is one of the depreciation methods.

This method calculates the depreciation expense for the year by using the year's digit over the sum-of-the-years-digits.

The sum-of-the-years-digits method adds up the total of the years that the asset will be depreciated and uses it as the denominator to determine the depreciation rate.  Thereafter, the depreciation rate is multiplied by the year's digit to obtain the depreciation expense.

Data and Calculations:

Cost of machinery on January 1, 2020 = $72,000

Salvage value = $7,200

Depreciable amount = $64,800 ($72,000 - $7,200)

Estimated useful life = 8 years

Sum-of-the-years-digits method:

Depreciation rate = $1,800 ($64,800/36)

a) 2020 depreciation expense using the sum-of-the-years-digits method, 36 = $14,400 (8 x $1,800).

b) Assuming the machinery was purchased on April 1, 2020, the 2020 depreciation expense is $ $10,800 (8 x $1,800 x 9/12).

Learn more about the sum-of-the-years-digits method at https://brainly.com/question/7666503

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