7. On Januaryl 1, 2013, Verlin Co. purchased new machinery for $300,000. There i
ID: 2576111 • Letter: 7
Question
7. On Januaryl 1, 2013, Verlin Co. purchased new machinery for $300,000. There is no salvage value. The machinery has an estimated useful life of 5 years, and depreciation is computed by the sum-of-the-years'-digits method. The accumulated depreciation on this machinery at December 31, 2014, should be (note: this is the end of the second year of depreciation)
A. $200,000 B. $120,000 C. $180,000 D. $100,00
9. Grover Corporation purchased a truck at the beginning of 2014 for $93,600. The truck is estimated to have a salvage value of $3,600 and a useful life of 120,000 miles. It was driven 21,000 miles in 2014. What is the depreciation expense for 2014?
A. $15,750 B. $21,750 C. $37,500 D. $17,010
11. Morgan Corporation purchased a depreciable asset for $400,000 on January 1, 2012. The estimated salvage value is $40,000, and the estimated useful life is 9 years. The straight-line method is used for depreciation. In 2015 (the beginning of the 4th year), Morgan changed its estimates to a total useful life of 5 years with a salvage value of $60,000. What is 2015 depreciation expense?
A. $110,000 B. $40,000 C. $120,000 D. $60,000
Explanation / Answer
Dear student, only one question is allowed at a time. I am answering the first question
7)
Depreciation under sum of years digits method = Depreciable base x Remaining useful life / Total useful life
Depreciable base = Purchase cost – Salvage value
= $300,000 – 0
= $300,000
Total useful life = n x (n + 1) / 2
Where, n = Number of useful life
= 5 x (5 + 1) / 2
= 15
So, Depreciation for 2013
= $300,000 x 5 / 15
= $100,000
And Depreciation for 2014
= $300,000 x 4 / 15
= $80,000
So, Accumulated depreciation
= Sum of depreciation of all years
= $100,000 + $80,000
= $180,000
So, option C is the correct option
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