Xyz enterprises purchased equipment for $140,000 on july 1, 2013. the equipment is expected to have a four-year life and a residual value of $20,000. using the sum-of-years'-digits method, the net book value of xyz’s equipment on december 31, 2014, would be (omit $ and , in the answer):

The answer is: Net book value of XYZ’s equipment on December 31, 2014 74000

Explanation:

Please find the calculation and explanations as below:

Sum-of-years'-digit = Useful life x ( Useful life +1) / 2 = 4 x 5/2 =10

Depreciable base: Cost of equipment - estimated residual value = 140,000 - 20,000 =$120,000

Apply the half year convention, we have depreciation for 2013 and 2014 are:

Depreciation expenses 2013 = (4:2)/10 x 120,000 = $24,000;

Depreciation expenses 2014 = [ (4:2)/10 + (3:2)/10 ] x 120,000 = $42,000.

=> Accumulated depreciation as at 31 December 2014 = $24,000 + $42,000 = $66,000

=>Net book value = $140,000 - $66,000 = $74,000

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