Question

On January 1, 2019, Woodstock, Inc. purchased a machine costing $40,600. Woodstock also paid $1,300 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,300. If Woodstock uses the straight-line depreciation method, which of the following statements is incorrect?

a. The annual depreciation expense is $6.100.
b. The December 31, 2019 book value is $35,800
c. The December 31, 2020 book value is $24,400
d. The December 31, 2021 accumulated depreciation balance is $18,300

Answer 1

Book value (2020)= $29,700

Step-by-step explanation:

Giving the following information:

Total purchase price= 40,600 +´1,300= $41,900

Useful life= 6 years

Residual value= $5,300

To determine which option is incorrect, we are going to calculate the annual depreciation, book value, and accumulated depreciation:

Annual depreciation= (Total purchase price - salvage value)/estimated life (years)

Annual depreciation= (41,900 - 5,300) / 6

Annual depreciation= $6,100

Accumulated depreciation (2021)= 6,100*3= $18,300

Book value (2019)= 41,900 - 6,100= $35,800

Book value (2020)= 35,800 - 6,100= $29,700