What is the depreciation for 2024 and the book value on December 31, 2024, using the sum-of-the-years'-digits method?
Final answer:
The depreciation for 2024 using the sum-of-the-years'-digits method would be calculated by multiplying the depreciable cost of the asset by the fraction 4/15. The book value on December 31, 2024, can be obtained by subtracting the accumulated depreciation from the asset's original cost.
Understanding the Sum-of-the-Years'-Digits Method
The sum-of-the-years'-digits method is a depreciation technique that focuses on allocating more depreciation expense to the earlier years of an asset's life. This method assumes that an asset's usefulness and productivity decline more rapidly in the initial years of its life.
Calculating Depreciation for 2024:
To calculate the depreciation for 2024 using the sum-of-the-years'-digits method, we first need to determine the remaining useful life of the asset. Let's assume the asset has a total useful life of 5 years. The sum of the digits for the useful life is calculated by adding 5 + 4 + 3 + 2 + 1, resulting in 15.
Considering that we are in 2024, the remaining useful life of the asset for this year would be 5 - 1 = 4 years. By multiplying the depreciable cost of the asset by the fraction 4/15, we can obtain the depreciation amount for 2024.
Calculating Book Value on December 31, 2024:
The book value on December 31, 2024, can be calculated by subtracting the accumulated depreciation from the asset's original cost. This will give us the remaining value of the asset at the end of the year.
It is essential to understand the concept and calculations involved in the sum-of-the-years'-digits method to accurately determine depreciation and book value figures for assets. By following the steps outlined above, businesses can effectively manage their asset value and depreciation expenses.