Question

Sketches Inc. purchased a machine on January 1, 2016. The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of an estimated 5-year life. The company expects to produce a total of 20,000 units. The company produced 1,100 units in 2016 and 1,550 units in 2017. Required: a. Calculate depreciation expense for 2016 and 2017 using the straight-line method.

Answer 1

Annual depreciation= $4,000

Step-by-step explanation:

Giving the following information:

The cost of the machine was $29,000. Its estimated residual value was $9,000 at the end of estimated 5-year life.

To calculate the depreciation expense, we need to use the following formula:

Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (29,000 - 9,000)/5

Annual depreciation= $4,000