Murgatroyd Co

Multiple Choice

Murgatroyd Co. purchased equipment on 1/1/07 for $500,000, estimating a four-year useful life and no residual value. In 2007 and 2008, Murgatroyd depreciated the asset using the sum-of-years'-digits method. In 2009, Murgatroyd changed to straight-line depreciation for this equipment. What depreciation would Murgatroyd record for the year 2009 on this equipment?

A) $ 75,000.
B) $125,000.
C) $150,000.
D) None of these is correct.The depreciation for 2007 was: $500,000 4/10 = $200,000.The depreciation for 2008 was: $500,000 3/10 = $150,000.This leaves a book value of $150,000 ($500,000 350,000) , so that the new depreciation would be $75,000 ($150,000 2) .