Machinery purchased for $50,000 by tom brady co. in 2010 was originally estimated to have a life of 10 years with a salvage value of $5,000 at the end of that time. depreciation has been entered for 6 years on this basis. in 2016, it is determined that the total estimated life should be 12 years with a salvage value of $2,500 at the end of that time. assume straight-line depreciation. determine the depreciation expense for 2016.

$3,417

Explanation:

Annual depreciation:

= (Cost of machinery - Salvage value) ÷ Usable life

= ($50,000 - $5,000) ÷ 10 years

= $4,500 per year

Net book value at the beginning of 2016:

= Cost of machinery - (Annual depreciation × basis years)

= $50,000 - ($4,500 × 6)

= $23,000

Depreciation expense for 2016:

= (Net book value at the beginning of 2016 - salvage value at the end of that time) ÷ 6 years

= ($23,000 - $2,500) ÷ 6

= $3,417

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.