On January 1, 2016, Hobart Mfg. Co. purchased a drill press at a cost of $30,500
ID: 2474359 • Letter: O
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.
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:
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:
Explanation / Answer
Depreciation 2016=($30,500-$5,500)*22,500/500,000=$1,125
Book Value at end of 2016=$30,500-$1,125=$29,375
Depreciation 2017=($30,500-$5,500)*79,000/500,000=$3,950
Book value at end 2017=$29,375-$3,950=$25,425