Question

A company purchased a weaving machine for $264,970. The machine has a useful life of 8 years and a residual value of $14,500. It is estimated that the machine could produce 759,000 bolts of woven fabric over its useful life. In the first year, 109,500 bolts were produced. In the second year, production increased to 113,500 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?a. $36,135b. $38,227c. $39,623

Answer 1

$37,455

Step-by-step explanation:

The computation of the depreciation per units or bolts under the units-of-production method is shown below:

= (Original cost - residual value) ÷ (estimated production bolts)

= ($264,970 - $14,500) ÷ (759,000 bolts)

= ($250,470) ÷ (759,000 bolts)

= $0.33 per bolt

Now for the second year, it would be

= Production units in second year × depreciation per bolts

= 113,500 units × 0.33

= $37,455

This is the answer and the same is not provided in the given options