Chapter 17.I, Problem 17RE

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

Chapter
Section

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Vanguard Manufacturing, Inc., purchased production-line machinery for $445,000. It is expected to last for 6 years and have a trade-in value of$25,000. Using the sum-of-the-years’ digits method, prepare a depreciation schedule for Vanguard.Vanguard Manufacturing, Inc. SYD Depreciation Schedule Production-Line Machinery End of Total Depreciation Annual Accumulated Book Year Depreciation Rate Fraction Depreciation Depreciation Value 1 (new) 2 3 4 5 6

To determine

To calculate: The depreciation schedule for Vanguard Manufacturing when the total cost of production-line machinery is $445,000. Explanation Given Information: The total cost of production-line machinery is$445,000. The residual value of machinery is $25,000 and expected to last 6 years. Formula used: The steps to prepare depreciation schedule by the sum-of-the-years digits method are as follows: Step 1: Calculate the total amount of depreciation by subtracting salvage value from the total cost. The total amount of depreciation is: Total amount of depreciation=Total cost-Salvage cost Step 2: Calculate the SYD depreciation rate fraction by dividing each year from years of useful life remaining. The SYD depreciation rate fraction is: The SYD depreciation rate fraction=Years of useful life remainingn(n+1)2 Step 3: Calculate the annual depreciation by multiplying total amount of depreciation by the depreciation rate fraction. The total amount of annual depreciation is: Total amount of annual depreciation=Total depreciation×Depreciation rate fraction Step 4: Prepare the depreciation schedule in form of chart. Calculation: Consider the total cost of production-line machinery is$445,000 and the residual value of machinery is $25,000. The total amount of depreciation is: Total amount of depreciation=Total cost-Salvage cost Now, using the above formula, the total amount of depreciation is: Total amount of depreciation=445,00025,000=$420,000

The SYD depreciation rate fraction is:

The SYD depreciation rate fraction=Years of useful life remainingn(n+1)2

Now, using the above formula, the SYD depreciation rate fraction is:

The SYD depreciation rate fraction=66(6+1)2=66(7)2=63(7)=621

The total amount of annual depreciation is:

Total amount of annual depreciation=Total depreciation×Depreciation rate fraction

Now, using the above formula, the total amount of annual depreciation for 1st year is:

Total amount of annual depreciation(year 1)=420,000×621=2,520,00021=$120,000 The accumulated depreciation for 1st year is the same as annual depreciation for 1st year: Accumulated depreciation=$120,000

The ending book value is the subtraction of accumulated depreciation of that year from the original cost

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