Question

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 75,000 bolts of woven fabric over its useful life. In the first year, 15,000 bolts were produced. In the second year, production increased to 19,000 units. Using the units-of-production method, what is the amount of accumulated depreciation at the end of the second year?

Answer 1

$45,600

Explanation:

Original Cost – 190,000

Salvage Value = 10,000

Depreciable Base = 190,000 – 10,000 = 180000 (Original - salvage)

Total Production Output 75,000 bolts (found in problem)

Depreciation Rate = 180,000/75000 =$2.40 /unit (Depreciable base/total production output)

Accumulated Depreciation

15000 (found in problem) units x 2.4 (Depreciation rate) = $36000 = Year 1

19000 (found in problem) units x 2.4 (depreciation rate) = $45,600 = Year 2