Question

Sum-of-Years' Digits Full Year Lockard Company purchased machinery on January 1, 2017 for $80,000. The machinery is estimated to have a salvage value of $8,000 after a useful life of 8 years. Compute the 2017 depreciation expense using the sum-of-years'-digits method.

Answer 1

The depreciation expense for Lockard Company in 2017 using the sum-of-years'-digits method is $16,000, calculated by allocating a fraction of the depreciable amount, which is based on the sum of the years' digits.

Step-by-step explanation:

To calculate the depreciation expense for 2017 using the sum-of-years'-digits method, we first determine the total depreciable amount, which is the cost minus the salvage value. The cost of the machinery is $80,000, and the salvage value is $8,000, so the total depreciable amount is $80,000 - $8,000 = $72,000.

We then calculate the sum of the years' digits. For 8 years, this is 1+2+3+4+5+6+7+8, which equals 36. The fraction for the first year is therefore 8/36, as the first year's weight is the highest and diminishes by one each year. In 2017, the machinery's first year, we multiply the fraction 8/36 by the total depreciable amount: (8/36) x $72,000 = $16,000.

Therefore, the depreciation expense for Lockard Company in 2017 for the machinery is $16,000 using the sum-of-years'-digits method.