Sum of the years digits method for 2018.Help explaining steps please 1,700 Less:

Question

Sum of the years digits method for 2018.Help

explaining steps please

1,700 Less: Purchase discount (2%) Freight-in.... Installation 800 3,800 87,900 Less: Salvage value1.500 $86,400 Depreciation base 2017-Straight line: ($86,400+8 years) X 2/3 year $7.200 2. Sum-of-the-years'-digits for 2018 Total Depreciation Machine Year 2017 2018 6,400* 11200** 1 8/36 X $86,400$19,200 $12,800* 2 7136 X $86,400- $16,800 $17.600 $19,200 X 8/12 $12,800 ** $19,200 X 4/12 = $ 6,400 $16,800 X 8/12 = $11,200 3. Double-declining-balance for 2017 ($87,900 X 25% X 8/12)-$14,650 (b) An activity method.

Explanation / Answer

1. Purchase price = $85000

Less: Purchase discount: ($1700)

Add: Freight in $800

Add: Installation $3800

Total cost $87900

Less : Salvage value ($1500)

Depreciable base $86400

Sum of the years' digit = 1+2+3+4+5+6+7+8 = 56/2 = 36

Depreciation for 2017 for 8 months = $86400 * 8/36 *8/12 = $12800

Depreciation for 2018 will be for full year, 12 months (from January 2018 to December 2018) = $86400 *7/36

= $16800

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