Question

Duluth Ranch, Incorporated purchased a machine on January 1,2021 . The cost of the machine was $35,000. Its estimated residual value was $11,000 at the end of an estimated 5 -year life. The company expects to produce a total of 20,000 units. The company produced 1,300 units in 2021 and 1,750 units in 2022. Required: Calculate depreciation expense for 2021 and 2022 using the straight-line method.

Answer 1

Using the straight-line method, the annual depreciation expense for the machine purchased by Duluth Ranch, Incorporated for both 2021 and 2022 is $4,800.

Step-by-step explanation:

To calculate the depreciation expense for 2021 and 2022 using the straight-line method for a machine purchased by Duluth Ranch, Incorporated, we need to use the straight-line depreciation formula:

Depreciation Expense = (Cost of the Asset - Residual Value) / Useful Life

The cost of the machine is $35,000 and its residual value is $11,000. The estimated useful life is 5 years. Plugging these values into the formula, we get:

Depreciation Expense = ($35,000 - $11,000) / 5

Depreciation Expense = $24,000 / 5

Depreciation Expense = $4,800 per year

Therefore, the annual depreciation expense for the years 2021 and 2022 is $4,800.