Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $32,000. Its estimated residual value was $10,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,200 units in 2016 and 1,650 units in 2017. Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method. Depreciation Expense 2016 Depreciation Expense 2017 b. 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.) 2016 2017 c. Calculate depreciation expense for 2016 through 2020 using the double-declining balance method. (Round your final answer to nearest dollar value.)
Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $32,000. Its estimated residual value was $10,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,200 units in 2016 and 1,650 units in 2017. Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method. Depreciation Expense 2016 Depreciation Expense 2017 b. 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.) 2016 2017 c. Calculate depreciation expense for 2016 through 2020 using the double-declining balance method. (Round your final answer to nearest dollar value.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $32,000. Its estimated residual value was $10,000
at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,200 units in
2016 and 1,650 units in 2017.
Required:
a.
Calculate depreciation expense for 2016 and 2017 using the straight-line method.
Depreciation Expense
Depreciation Expense
2016
b. 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.)
2017
Depreciation Expense
2016 2017
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
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