00:01
Hello, to calculate the book value of the equipment at december 31, 2016 using the sum of years digit method, we need to determine the number of years the equipment has been in the use by the company.
00:16
Given that the equipment has been purchased on september 1, 2015, the time period from september 2015 to december 31, 2016 is considered as 2 years.
00:35
To calculate the sum of year digits depreciation rate, we sum the digit from 1 to useful life of the asset, which in this case is 10 years.
00:47
So the sum of digits from 1 to 10 is 55 and how we calculated this by applying the formula n n plus 1 divided by 2.
00:57
So years is 10, so 10 plus 1 divided by 2, it will be 55.
01:04
To calculate the depreciation expense for each year, we use the following formula, which depreciation expense equals to remaining life divided by sum of digits multiplied by cost less salvage value.
01:45
Now for the first year, the remaining life is 10 years.
01:51
So we will say that 10 divided by 55 multiplied by 23000 less 10000, which will be equals to 40000...