A company purchased a new vehicle for 45000 The vehicle has

A company purchased a new vehicle for $45,000. The vehicle has a useful life of 10 years and a $3,500 salvage values. What s the anual depreciation rate using the sum-of-years method? 7)

Solution

Year

Beginning
Book Value

Depreciation
Percent

Depreciation
Amount

Accumulated
Depreciation
Amount

Ending
Book Value

1

$45,000

18.18%

$7,545

$7,545

$37,455

2

$37,455

16.36%

$6,791

$14,336

$30,664

3

$30,664

14.54%

$6,036

$20,372

$24,628

4

$24,628

12.73%

$5,282

$25,654

$19,346

5

$19,346

10.91%

$4,527

$30,181

$14,819

6

$14,819

9.09%

$3,773

$33,954

$11,046

7

$11,046

7.27%

$3,018

$36,972

$8,028

8

$8,028

5.46%

$2,264

$39,236

$5,764

9

$5,764

3.64%

$1,509

$40,745

$4,255

10

$4,255

1.82%

$755

$41,500

$3,500

Sum of the digits method

= Book Value of the Asset x remaining useful life ÷ Sum of the years’ digit

Sum of the years digit = 1 +2 +3+4+5+6+7+8+9+10 = 55

For Example

1^st year = (45,000 – 3,500) x 10 ÷ 55 = 7,545

Depreciation rate = 7,545÷41,500*100 = 18.18%

Year	Beginning Book Value	Depreciation Percent	Depreciation Amount	Accumulated Depreciation Amount	Ending Book Value
1	$45,000	18.18%	$7,545	$7,545	$37,455
2	$37,455	16.36%	$6,791	$14,336	$30,664
3	$30,664	14.54%	$6,036	$20,372	$24,628
4	$24,628	12.73%	$5,282	$25,654	$19,346
5	$19,346	10.91%	$4,527	$30,181	$14,819
6	$14,819	9.09%	$3,773	$33,954	$11,046
7	$11,046	7.27%	$3,018	$36,972	$8,028
8	$8,028	5.46%	$2,264	$39,236	$5,764
9	$5,764	3.64%	$1,509	$40,745	$4,255
10	$4,255	1.82%	$755	$41,500	$3,500