A company purchased a weaving machine for $341,560. The machine has a useful lif
ID: 2450733 • Letter: A
Question
A company purchased a weaving machine for $341,560. The machine has a useful life of 8 years and a residual value of $19,000. It is estimated that the machine could produce 768,000 bolts of woven fabric over its useful life. In the first year, 114,000 bolts were produced. In the second year, production increased to 118,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?
A.) $49,560.
B.) $50,700.
C.) $97,440.
D.) $52,479.
E.) $47,880.
A company purchased a weaving machine for $341,560. The machine has a useful life of 8 years and a residual value of $19,000. It is estimated that the machine could produce 768,000 bolts of woven fabric over its useful life. In the first year, 114,000 bolts were produced. In the second year, production increased to 118,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?
Explanation / Answer
Calculation of amount of depreciation expense that should be recorded for the second year:
Using the units-of-production method
Formula :
Depreciation = (Cost - Salvage value )*Number of Units Produced / Life in Number of Units
Cost
$ 341,560
Salvage value
$ 19,000
Number of Units Produced in second year
118000
Life in Number of Units
768,000
Depreciation for second year =
$ 49,560.00
= (341560-19000)*118000/ 768000
Calculation of amount of depreciation expense that should be recorded for the second year:
Using the units-of-production method
Formula :
Depreciation = (Cost - Salvage value )*Number of Units Produced / Life in Number of Units
Cost
$ 341,560
Salvage value
$ 19,000
Number of Units Produced in second year
118000
Life in Number of Units
768,000
Depreciation for second year =
$ 49,560.00
= (341560-19000)*118000/ 768000
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