On January 1, 2016, 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 December 31, 2017 book value should be $25,000, not $24,000. The annual depreciation expense is $6,000, so after two years, the accumulated depreciation would be $12,000, making the book value $40,000 + $1,000 - $12,000 = $29,000.