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?

Question

Quizplus · Accepted Answer

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.