Ask Question
6 June, 13:04

On January 1, 2012, Graham Company purchased a new machine for $2,800,000. The new machine has an estimated useful life of nine years and the salvage value was estimated to be $100,000.

Depreciation was computed on the sum-of-the-years'-digits method.

What amount should be shown in Graham's balance sheet at December 31, 2013, net of accumulated depreciation, for this machine?

a. $2,260,000

b. $1,780,000

c. $1,742,221

d. $1,659,000

+1
Answers (1)
  1. 6 June, 15:22
    0
    Depreciable amount = Cost - Salvage value

    = $2,800,000 - $100,000

    = $2,700,000

    Year Digits Depreciation per annum

    2012 9 9/45 x $2,700,000 = $540,000

    2013 8 8/45 x $2,700,000 = $480,000

    Accumulated depreciation = $1,020,000

    The amount to be shown in balance sheet at December 31, 2013

    = Cost - Accumulated depreciation

    = $2,800,000 - $1,020,000

    = $1,780,000

    The correct answer is B

    Explanation:

    In this case, we need to calculate the depreciable amount, which is cost less salvage value. Then we will calculate the depreciation for 2012 and 2013. A digit of 9 is assigned to 2012 and a digit of 8 is assigned to 2013 based on sum-of-the-year-digits method. The depreciation for 2012 is calculated as 9/45 of the depreciable amount and the depreciation for 2013 is calculated as 8/45 of the depreciable amount. The total digits for 9 years is calculated as 1+2+3+4+5+6+7+8+9 = 45.

    The amount to be disclosed in balance sheet equals cost minus accumulated depreciation for 2012 and 2013.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “On January 1, 2012, Graham Company purchased a new machine for $2,800,000. The new machine has an estimated useful life of nine years and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers