Question

On January 1, 2016, Hobart Mfg. Co. purchased a drill press at a cost of $30,500. The drill press is expected to last 10 years and has a residual value of $5,500. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2016 and 2017, 22,500 and 79,000 units, respectively, were produced.

Required:
Compute depreciation for 2016 and 2017 and the book value of the drill press at December 31, 2016 and 2017, assuming the straight-line method is used.

2016 2017

Depreciation:

Book Values:

Answer 1

Depreciation expense in 2016 and 2017 is $2,500

Book value in 2016 = $28,000

Book value in 2017 = $25,500

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($30,500 - $5,500) / 10 = $2,500

The deprecation expense each year of its 10 year useful life would be $2,500.

Book value in 2016 = $30,500 - $2,500 = $28,000

Book value in 2017 = $28,000 - $2,500 = $25,500

I hope my answer helps you