Question

Cheshire Corporation purchases a machine for​ $125,000. It has an estimated salvage value of​ $10,000 and is expected to produce​ 100,000 units in its lifetime. During the first year of​ operation, it produced​ 15,500 units. To the nearest​ dollar, the depreciation for the first year under the units of production method will​ be: (Round intermediary calculations to the nearest​ cent, and the final answer to the nearest​ dollar.)

Answer 1

Answer: $17,825

Step-by-step explanation:

Given that,

Purchases a machine = $125,000

Estimated salvage value =​ $10,000

Expected to produce = 100,000 units in its lifetime

Produced ​(during first year) = 15,500 units

Depreciable cost = Cost of machine - salvage value

= $125,000 - $10,000

= $115,000

Depreciation for first year = Depreciable cost ×
`(Produced\ ​during\ first\ year)/(Expected\ to\ produce)`

= 115,000 ×
`(15,500)/(100,000)`

= $17,825

Answer 2

Answer: Depreciation for the first year = 17825

Step-by-step explanation:

Given:

Machine purchased for $125,000

Salvage value of​ $10,000

Output = ​100,000

First year of​ operation, Output = 15500

First, we'll evaluate depreciation per unit over the entire life of the machine:

i.e.
`Depreciation\ per\ unit = ( Purchasing\ cost - Salvage\ value)/(Total\ units\ produced)`

Depreciation per unit =
`(125000 - 10000)/(100000)`

Depreciation per unit = 1.15

Now, we'll compute the depreciation for the first year:

Depreciation for the first year = Depreciation per unit × Output (first year)

Depreciation for the first year = 1.15 × 15500

Depreciation for the first year = 17825