Question

On September 19, 2014, Markham Co. purchased machinery for $285,000. Salvage value was estimated to be $15,000. The machinery will be depreciated over eight years using the sum-of-the-years'-digits method. If depreciation is computed on the basis of the nearest full month, Markham should record depreciation expense for 2015 on this machinery of

a. $61,354.
b. $58,267.
c. $58,125.
d. $52,500.

Answer 1

To calculate the depreciation expense for the machinery in 2015 using the sum-of-the-years'-digits method, subtract 1 from the remaining useful life, calculate the sum of the digits, and divide the depreciable cost by the sum of the digits. The depreciation expense for 2015 is approximately $115,714.29.

Step-by-step explanation:

To determine the depreciation expense for 2015 using the sum-of-the-years'-digits method, we first need to calculate the total number of years of useful life remaining for the machinery. The machinery was purchased in 2014 and has an estimated useful life of 8 years, so the remaining useful life in 2015 would be 8 - 1 = 7 years.

Next, we calculate the sum of the digits for the remaining useful life. The sum of the digits formula is: n(n+1)/2, where n is the useful life remaining. In this case, the sum of the digits would be 7(7+1)/2 = 28.

Finally, we divide the depreciable cost (cost minus salvage value) by the sum of the digits to determine the depreciation expense for 2015. The depreciable cost is $285,000 - $15,000 = $270,000. Therefore, the depreciation expense for 2015 would be $270,000/28 ≈ $9,642.86 per month. Multiplying this by 12 months, we get a total annual depreciation expense of $9,642.86 * 12 = $115,714.29.