Asked by Laken Guzic on Jun 29, 2024
Verified
On January 1,2019,Woodstock,Inc.purchased a machine costing $40,000.Woodstock also paid $1,000 for transportation and installation.The expected useful life of the machine is 6 years and the residual value is $5,000. If Woodstock uses the straight-line depreciation method,which of the following statements is incorrect?
A) The annual depreciation expense is $6,000.
B) The December 31,2019 book value is $35,000.
C) The December 31,2021 accumulated depreciation balance is $18,000.
D) The December 31,2020 book value is $24,000.
Annual Depreciation Expense
Annual depreciation expense is the portion of the cost of a fixed asset that is expensed each year over its useful life, reflecting its decrease in value.
Straight-Line Depreciation
A method of allocating the cost of an asset evenly over its useful life, indicating how much of the asset's value has been used up each year.
Accumulated Depreciation Balance
The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired.
- Acquire knowledge on the core concepts and mathematical processes of the straight-line depreciation method.
Verified Answer
CI
Christine IdrovoJul 01, 2024
Final Answer :
D
Explanation :
The correct calculation for annual depreciation using the straight-line method is: (Cost - Residual Value) / Useful Life = ($40,000 + $1,000 - $5,000) / 6 = $6,000 per year. Therefore, the December 31, 2020 book value should be $40,000 + $1,000 - $6,000 * 2 = $29,000, not $24,000.
Learning Objectives
- Acquire knowledge on the core concepts and mathematical processes of the straight-line depreciation method.