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Sum of the Years Digit Method Solved Problems

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95 views

Sum of the Years Digit Method Solved Problems

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serinarusselfroi
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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DEPRECIATION (SUM OF THE YEARS DIGIT METHOD)

1. An asset is purchased for $20,000.00. Its estimated life is 10 years,


after which it will be sold for $5,000.00. Find the book value during
the third year if the sun-of-the-year’s digit (SYD) depreciation is
used.
1 + 10
𝑆𝑌𝐷 = ( ) (10) = 55
2
10
Dep1 = (20,000 – 5,000) ( ) = $2,727.27
55

9
Dep2 = (20,000 – 5,000) ( ) = $2,454.55
55

8
Dep3 = (20,000 – 5,000) ( ) = $2,181.82
55

Total for 3 years = $7,363.64

BV3 = 20,000 – 7,363.64

BV3 = $12,636.36

2. An asset is purchased for $25,000.00. Its estimated life is 10 years


after which it will be sold for $12,000.00. Find the book value during
the first year if sum-of-the-years’ digit (SYD) depreciation is used.
1+10
SYD = ( ) (10) = 55
2

10
Dep1 = (25,000 – 12,000) ( ) = $2,363.64
55

BV1 = 25,000 – 2,363.64

BV1 = $22,636.36
3. A telephone company purchased a microwave radio equipment
for $4M. Fright and instalment charges amounted to 3% of the
purchased price. If the equipment shall be depreciated over a period
for 8 years with a salvage value of 5%. Determine the depreciation
charge during the 5th year using the sum-of-the-year’s digit method.
1+8
SYD = ( ) (8) = 36
2

F.C. = 4,000,000 + .03 (4,000,000)

F.C. = $4,120,000.00

S.V. = .05 (4,120,000.00)

S.V. = $206,000.00

Depreciation Charge on the 5th year.


4
Dep. = 4,120,000 – 206,000) ( )
36

Dep. = $434,888.89

4. An asset is purchased a universal testing machine for


$500,000.00. Its estimated life is 10 years, after which it will be sold
for $36,000.00. Find the depreciation for the second year using the
sum-of-the-years-digit method.
1+10
SYD = ( ) (10) = 55
2

9
Dep. of 2nd year = (500,000 – 36,000) ( )
55

Dep. of 2nd year = $75,927.27


5. Special tools for the manufacture of finished product
cost of $40,000.00 and have salvage value of $4,000.00 at
the end of the estimated three year useful life. Compute the
second year depreciation using sum of years digit method.
1+3
SYD = ( ) (3) = 6
2

Depreciation on the second year:


2
Dep. = (40,000 – 4,000) ( )
6

Dep. =$12,000.00

6. A certain office equipment has a first cost of $50,000.00 and a


salvage value of $12,000 at the end of 10 years. Determine its book
value at the end of 6 years using: Sum Of years Digit Method.
1+10
SYD = ( ) (10) = 55
2

45
Total dep. = (50,000 – 12,000) ( )
55

Total dep. = $31,090.91

Book Value = 50,000 – 31,090.91

Book Value = $18,909.09


7. An equipment for a road construction was bought 3
years ago for $45,000.00. The expected life of the
equipment is 5 years. What is the book value of the
equipment now using the sum of the years digit method.

1+5
SYD = ( ) (5) = 15
2

Book Value = (45,000.00 – 36,000.00) = $9,000.00

Total depreciation for 3 years:


5+4+3
Dep. = ( ) (45,000)
15

Dep. = $36,000.00

8. A company purchases an asset for $50000.00 and plans


to keep it for 15 years. If the salvage value is zero at the
end of the 15th year, what is the depreciation in the third
year? Use sum of the years digits depreciation.
1+15
SYD = ( ) (15) = 120
2

13
Dep3 = (50,000 – 0 ) ( )
120

Dep3 = $5416.67
9. The corporation purchased a machine for $3,000,000.
Freight and installation charges amounted 5% of the
purchased price. If the machine shall be depreciated over a
period of 8 years with a salvage value of 7%. Determine
the depreciation charged during the 5th year using the sum
of the years digit method.
1+8
SYD = ( ) (8) = 36
2

F.C. = 3,000,000 + .05 (3,000,000)

F.C. = $3150,000.00

S.V. = .07 (3,150,000.00)

S.V. = $220,500.00

Depreciation Charge on the 5th year.


4
Dep. = (3,150,000 – 220,500) ( )
36

Dep. = $325,500.00

10. An asset is purchased for $45,000.00. Its estimated life


is 10 years after which it will be sold for $8,000.00. Find
the depreciation for the first year using the sum of the
years digit method.

1+10
SYD = ( ) (10) = 55
2

10
Dep. = (45,000.00 – 8,000.00) ( )
55

Dep. = $6,727.27

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