900 points Problem 9255 LO3 Sketches Inc purchased a machine

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.)

Solution

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)