B Company switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2018. The change affects machinery purchased at the beginning of 2016 at a cost of $83,700. The machinery has an estimated life of five years and an estimated residual value of $4,185. What is B's 2018 depreciation expense?

a. $15,903
b. $21.204.
c. $22.320
d. $10,602.

correct option is d. $10,602.

Explanation:

given data

beginning of 2016  cost = $83,700

time period = 5 year

estimated residual value = $4,185

solution

we use here  sum of years digit that will be

sum of years = 5+4+3+2+1

sum of years = 15

so here

Year  2016

Depreciation = $83,700 - $4,185

base remaining   = $79515

Life  = 5

depreciation before change of accounting  =  

depreciation before change of accounting  = $26505

and

Year  2017

Depreciation = $83,700 - $4,185

base remaining   = $79515

Life  = 4

depreciation before change of accounting  =  

depreciation before change of accounting  = $21204

so here total depreciation before change of accounting policy is

total depreciation =  $26505 + $21204

total depreciation =  $47709

and

so Net value of asset at start of 2018 = $79515 - $47709

Net value of asset at start of 2018  = $31806

and

Straight line depreciation for 2018 = $31806 ÷ 3

Straight line depreciation for 2018 = $10602

so correct option is d. $10,602.

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