On January 1, 2010, Frommer, Inc.purchased an asset for $32, 000.It was estimated that the asset life was seven years, after which it would have a residual value of $2, 100.Assuming the use of the sum-of-the-years'-digits method, depreciation expense for 2010 would be

A) $4, 271
B) $7, 475
C) $8, 000
D) $8, 543

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Katie Murphy · Accepted Answer

Final Answer : B, Explanation :  The sum-of-the-years'-digits method involves calculating the depreciation expense by multiplying the depreciable base by a fraction. The depreciable base is the cost minus the residual value ($32,000 - $2,100 = $29,900). The sum of the years' digits for 7 years is 28 (7+6+5+4+3+2+1). For the first year, the fraction is 7/28. Therefore, the depreciation expense for 2010 is $29,900 * (7/28) = $7,475.

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