On January 1, 2014, Woodstock, Inc. purchased a machine costing $41,600. Woodsto

Question

On January 1, 2014, Woodstock, Inc. purchased a machine costing $41,600. Woodstock also paid $1,800 for transportation and installation. The expected useful life of the machine is 5 years and the residual value is $5,800. If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

A. The December 31, 2016 accumulated depreciation balance was $22,560.

B. The December 31, 2014 book value was $35,880.

C. The annual depreciation expense is $7,520.

D. The December 31, 2015 book value was $22,560.

Please show all math where possible and provided a detailed explanation.

Explanation / Answer

D. The December 31, 2015 book value was $22,560, is incorrect

41600+1800 => 43400 Cost of asset

Dep => (43400 - 5800 )/ 5 => 7520

December 31, 2014 book value was => 43400 - 7520 => 35880

December 31, 2016 accumulated depreciation balance was => 7520 +7520+7520 => 22560

December 31, 2015 book value was=> 43400 - 7520-7520 => 28360 , but given 22560 hence incorrect

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