3 Sketches Inc purchased a machine on January 1 2016 The cos

3. Sketches Inc purchased a machine on January 1, 2016. The cost of the machine was $39,500. Its estmated residual value was $12,500 at the end of an estimated 5-year life. The company expects to produce a total of 10,000 units. The company produced 1,450 units in 2016 and 1,900 units in 2017 a. Calculate depreciation expense for 2018 and 2017 using the straight-ine method b Calculate the depreciation expense for 2018 and 2017 using the units-of-production method. (Do not round your intermediate calculations Round your final answers to the nearest whole dollar) Expense C. Calculate deprecation expense for 2010 through 2020 using the double decining balance method. (Round your final answer to nearest dollar value

Solution

1

A.) Calculate depreciation expense for 2016 and 2017 using straight line method.

Depreciation rate under Straight Line Method

=Cost-salvage value/ life of the Asstes

=39500-12500/5

=5400 depreciation each year

2016

2017

Depreciation Expanses

5400

5400

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B.)Calculate depreciation expense for 2016 and 2017 using units of production method.

Depreciation rate under Straight Line Method

=Cost-salvage value/ Unit produced during the life of assets

=39500-12500/10,000 units

=$2.7 deprecation per unit

Year

Unit
produced

Rate of
Depreciation

Annual Dep

A

B

C=A*B

1

1450

2.7

3915

2

1900

2.7

5130

2016

2017

Depreciation Expanses

3915

5130

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C.)

Calculate depreciation expense for 2016 through 2020 the using double declining balance method.

Depreciation rate under Straight Line Method= 1/ 5 years=20%

Depreciation rate under (DDB) Double decline Method

= 2 x Depreciation rate under Straight Line Method

=2 x 20

=40%

Double Declining Method

Year

Book Value of Beg yr

Dep Rate

=

Annual Dep

Accumulated
Depreciation

Book Value

A

B

C=A*B

A-C

1

39,500

40.00%

=

15800

15800

23,700

2

23,700

40.00%

=

9480

25280

14,220

3

14,220

=

1,720

27000

12,500

4

12,500

=

0

27000

12,500

5

12,500

=

0

27000

12,500

2016

2017

2018

2019

2020

Depreciation Expanses

15,800

9480

1,720

0

0

	2016	2017
Depreciation Expanses	5400	5400