Using the sum-of-the-years-digits method, how much depreciation expense should Vorst record in 2020 for Asset B? a.
Question:
Using the sum-of-the-years’-digits method, how much depreciation expense should Vorst record in 2020 for Asset B?
a. $6,000
b. $9,000
c. $11,000
d. $12,000
The following information: Vorst Corporation’s schedule of depreciable assets at December 31, 2019, was as follows:
Vorst takes a full year’s depreciation expense in the year of an asset’s acquisition and no depreciation expense in the year of an asset’s disposition. The estimated useful life of each depreciable asset is 5 years.
Accumulated Acquisition Residual Depreciation $ 64,000 Value Asset Cost Date $100,000 55,000 70,000 $225,000 $20,000 10,000 14,000 $44,000 2018 B 36,000 33,600 $133,600 2017 2017
Step by Step Answer:
Intermediate Accounting Reporting and Analysis
ISBN: 978-1337788281
3rd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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