9.00 points Problem 9-255 [LO3] Sketches Inc. purchased a machine on January 1,

Question

9.00 points Problem 9-255 [LO3] Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $21,500. Its estimated residual value was $6,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 850 units in 2016 and 1,300 units in 2017. Required a. Calculate depreciation expense for 2016 and 2017 using the straight-line method 2016 2017 Calculate the depreciation expense for 2016 and 2017 using the units-of-production method. (Do not o. round your intermediate calculations. Round your final answers to the nearest whole dollar.) 2017 c. method. (Round your final answer to nearest dollar value.)

Explanation / Answer

a) Straight line method = (cost - salvage value)/Life(yrs) Year Cost (a) Depreciable Value Depreciation Accumulated Depreciation (b) Book Value (a-b) Calculation 2016 $21,500 $15,000 $3,000 $3,000 $18,500 ($15000/5) 2017 $21,500 $15,000 $3,000 $6,000 $15,500 ($15000/5) b) Unit of prodcution= (cost - salvage value)*No. of Unit prodcued/ Total Capacity Year Cost (a) Depreciable Value Depreciation Accumulated Depreciation (b) Book Value (a-b) Calculation 2016 $21,500 $15,000 1275 $1,275 $20,225 ($15000/10000*850) 2017 $21,500 $15,000 1950 $3,225 $18,275 ($15000/10000*1300) C). Double Decline Method = Carrying value * (straight rate * 2) Year Cost (a) Depreciable Value Depreciation Accumulated Depreciation (b) Book Value (a-b) Calculation 2016 $21,500 $21,500 $8,600 $8,600 $12,900 ($21500*0.20*2) 2017 $21,500 $12,900 $5,160 $13,760 $7,740 ($12900*0.20*2) 2018 $21,500 $7,740 $3,096 $16,856 $4,644 (7740*0.20*2) 2019 $21,500 $4,644 $1,858 $18,714 $2,786 (4644*0.20*2) 2020 $21,500 $2,786 $1,115 $19,828 $1,672 (2786*0.20*2)

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