Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine wa
ID: 2576763 • Letter: S
Question
Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $26,000. Its estimated residual value was $8,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,000 units in 2016 and 1,450 units in 2017 Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method. 2016 2017 Depreciation Expense Calculate the depreciation expense for 2016 and 2017 using the units-of-production method. (Do not round your intermediate calculations. Round your final answers to the nearest whole dollar) b. 2016 2017 Depreciation Expensel c. Calculate depreciation expense for 2016 through 2020 using the double-declining balance method. (Round your final answer to nearest dollar value.) 2016 2017 2018 2019 2020 Depreciation ExpenseExplanation / Answer
Answer:
1
Straight line method Depriciation
=(cost-salvage value )/life
=(26000-8000) /5 years
=18,000/5
=$3600 depriciation each year
2016
2017
Depricaition
3600
3600
____________________________________
2
Units of production Method
=(cost-salvage value )/Total units produced during the life
=(26000-8000) /20,000
=18,000/20,000
=0.90 depriciation each unit
2016
2017
Unit produced
1000
1450
Depricaition rate
0.9
0.9
Depricaition
900
1305
2016
2017
Depricaition
900
1305
___________________________________________
3
Double Declining balance Method
In Double Declining balance Method we take the double rate depriciation then what we take in straigh line
SO DDB rate
=2 x (100/5)
=2 x 20%
=40%
Year
Beginig value
rate
Deprecation
Ending
value
A
B
C=A*B
D= A-C
1
26000
40%
10400
15600
2
15600
40%
6240
9360
3
9360
40%
1360
8000
4
5
2016
2017
2018
2019
2020
Depreciation
10400
6240
1360
0
0
Note : In Double Declining balance Method we should depreciate up to the salvage value
2016
2017
Depricaition
3600
3600
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