Question

Nash Company purchased machinery on January 1, 2017, for $91,200. The machinery is estimated to have a salvage value of $9,120 after a useful life of 8 years.

1. Compute 2017 depreciation expense using the sum-of-the-years'-digits method.

Answer 1

$18,240

Step-by-step explanation:

The computation of the depreciation expense under the um-of-the-years'-digits method is shown below:

= (Original cost - salvage value) × useful life ÷ sum of useful life

= ($91,200 - $9,120) × 8 ÷ 36

= $82,080 × 8 ÷ 36

= $18,240

The sum of useful life would be

= 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1

= 36

The method is same as we do in straight-line but the difference is of sum of useful life.