Broadway Ltd

Multiple Choice

Broadway Ltd. purchased equipment on 1/1/07 for $800,000, estimating a five-year useful life and no residual value. In 2007 and 2008, Broadway depreciated the asset using the straight-line method. In 2009, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2009 on this equipment?

A) $120,000.
B) $160,000.
C) $200,000.
D) $240,000.The depreciation for 2007 and 2008 was: $800,000 5 = $160,000 per year.This leaves a book value of $480,000 ($800,000 320,000) and three years remain in the asset's life.Under SYD, the remaining depreciable base would be multiplied by 3 (1 + 2 + 3) for 2010, or 3/6 $480,000 = $240,000 in depreciation.