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On January 1, year 1, Glasser Corp. purchased equipment for $120,000. The equipment has a useful life of 3 years, and a residual value of $20,000. Using the sum-of-the-years'-digits method, what is the depreciation expense for year 1?

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facundobuzzetti

Answer:

Depreciation expense= $17,000

Explanation:

Giving the following information:

Purchase price= $120,000

Useful life= 3 years

Residual value= $20,000

To calculate the depreciation expense under the sum-of-the-years'-digits, we need to use the following formula:

Depreciation expense= book value*(remaining useful life / sum of the years

Sum of the years= 1 + 2 + 3= 6

Depreciation expense= (120,000 - 20,000) * (1/6)

Depreciation expense= 100,000*0.17

Depreciation expense= $17,000