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DEPRECIATION
Sum of Years Digits Method

Instructions: Select the correct answer for each problem. Write your answers and solution neatly
on a separate sheet of paper. If the answer is not in the choices, you can provide your answer with
your solution.

1. A machine costing 500,000.00 has a life expectancy of 5 years. Using the sum of the years’
digits method, find the salvage value when the first year depreciation cost is 100,000.00.
a. 100,000.00 c. 150,000.00
b. 200,000.00 d. 250,000.00

2. An equipment as bought for 1.8 million with a salvage value of 350,000.00 after its life of 8
years. Using the sum of the years’ digits method, Find its book value after 5 years.
a. 752,777.77 c. 591,666.67
b. 470,833.33 d. 954,166.67

Situation (3-5)
A certain equipment that cost 7,000.00 has an economic life of n years and salvage value
of 350.00 at the end of its expected life. The book value at the end of 4 years is 2,197.22. Use Sum
of the Years’ Digits Method.

3. Compute the economic life of the equipment.

a. 10 years c. 11 years
b. 8 years d. 9 years

4. Compute the total depreciation after 6 years.

a. 6,095.83 c. 5,138.64
b. 5,440.91 d. 5,763.33

5. Compute the book value on the 7th year.

a. 793.33 c. 534.72
b. 1,357.58 d. 1,075.45