A paper shredder purchased by Value Choice Electronics is expected to last 5 years. The purchase price was $3,943. Shipping costs were $150 and initial setup charges were $157. The trade-in value is $395. Prepare a depreciation schedule using the sum-of-the-year's method, then enter the accumulated depreciation at the end of year 4 as your answer.
A) $2,997
B) $649
C) $257
D) $3,598

Question

Quizplus · Accepted Answer

The sum-of-the-year's-digits method calculates depreciation based on the sum of the years' digits. The total cost is $4,250 ($3,943 + $150 + $157), and the depreciable amount is $3,855 ($4,250 - $395). The sum of the years' digits for 5 years is 15 (5+4+3+2+1). The depreciation for each year is calculated as a fraction of the depreciable amount. By the end of year 4, the accumulated depreciation is $3,598.

A Paper Shredder Purchased by Value Choice Electronics Is Expected