Question

A company purchased a weaving machine for $273,400. The machine has a useful life of 8 years and a residual value of $15,000. It is estimated that the machine could produce 760,000 bolts of woven fabric over its useful life. In the first year, 110,000 bolts were produced. In the second year, production increased to 114,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year

Answer 1

Annual depreciation= $38,760

Step-by-step explanation:

To calculate the depreciation expense, we need to use the following formula:

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced

Annual depreciation= [(273,400 - 15,000)/760,000]*114,000

Annual depreciation= $38,760