Question

On April 1, 20X4, Kew Co. purchased new machinery for $300,000. The machinery has an estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits method.The accumulated depreciation on this machinery at March 31, 20X6 should be:________.a) $192,000b) $180,000c) $120,000d) $100,000

Answer 1

The answer is B. $180,000

Step-by-step explanation:

The sum of years' digits method is an accelerated depreciation that is based on the assumption that the productivity of the asset decreases with time.

Here, the sum of the digits are found. In this question, useful life is 5 years. So the sum of the digit is:

5+4+3+2+1 = 15.

April 1 20X4 through March 31 20X6 is 2 years.

First year depreciation is:

5/15 x $300,000

=$100,000

2nd year depreciation is:

4/15 x $300,000

=$80,000

Therefore, accumulated depreciation is

$100,000 + $80,000

$180,000