Depreciation

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Original cost= 126000 ,Salvage value=Nil ,useful life=6 years, depreciation for the 4th year under sum of  years digits method will be ???                Plz give explanation for the above problem

And is 18000

 

Replies (1)

1. Sum of digits of 6 years will be 21. (1+2+.....6 = 21)

2. Multiplying Factor (N) for each year will be original cost - final cost  divided by digital sum

i.e. N = (126000 - 0) / 21.

or N = 6000.

So, depreciation for each year will be as ...

First year .........   6 * N  = 36000.

Second year ..... 5 * N

Third year ....      4 * N

Forth year ....     3 * N  = 18000.

Fifth Year  .....    2 * N

Sixth Year .....   1 * N  = 6000

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