# Sum of Digit & Declining Balance Method

50. On January 1, 2011, Carson Company purchased equipment at a cost of $570,000. The equipment was estimated to have a useful life of five years and a salvage value of $60,000. Carson uses the sum-of-the-years'-digits method of depreciation. What should the accumulated depreciation be at December 31, 2013?

a. $340,000

b. $408,000

c. $456,000

d. $510,000

51. Overberg Company purchased a machine on January 2, 2010, for $1,000,000. The machine has an estimated useful life of five years and a salvage value of $100,000. Depreciation was computed by the 150% declining-balance method. The accumulated depreciation balance at December 31, 2011, should be

a. $360,000.

b. $459,000.

c. $490,000.

d. $510,000.

TVM

52. Bank One loans ABC Corporation $50,000 to buy a piece of equipment. Bank One accepts a note due in 2 years with interest at 12% compounded monthly. How much cash does Bank One expect to receive when the note is paid at maturity?

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#### Solution Preview

50 - Total Sum of digits 5+4+3+2+1 = 15. Sum of digits for 3 year 5+4+3 = 12

Depreciation = {(570000-60000)/15} * 12 = $408,000

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#### Solution Summary

The solution computes depreciation using Sum of Digit & Declining Balance Method and also calculates maturity amount for note.