Question

On January 1, 2008, Halltown Company purchased equipment at a cost of $130,000. The equipment was estimated to have a salvage value of $4,000 and it is being depreciated over eight years under the sum-of-the-years'-digits method. What should be the charge for depreciation of this equipment for the year ended December 31, 2015?

a. $3,500
b. $3,611
c. $16,250
d. $15,750

Answer 1

The charge for depreciation of the equipment for the year ended December 31, 2015, would be $0.

Step-by-step explanation:

To calculate the depreciation expense using the sum-of-the-years'-digits method, you need to follow these steps:

1. Calculate the sum-of-the-years'-digits (SYD) by adding up the digits from 1 to the useful life of the equipment. In this case, the useful life is 8 years, so the SYD would be 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 = 36.
2. Calculate the depreciation expense for each year by multiplying the depreciable cost (cost - salvage value) by the fraction of the remaining useful life over the SYD. For the year 2015, the remaining useful life is 8 - 8 = 0, so the depreciation expense would be 0.

Therefore, the charge for depreciation of this equipment for the year ended December 31, 2015, would be $0.