Question

Havana Company purchased a carton a fabrication unit of 247,500 on January 8 20X1, The machines useful life is estimated as 3,000,000 units of product or eight years and its salvage value is estimated 22,500. The numbers of cartons fabricated in each year is as follows: Compute depreciation expense and accumulated expense

Answer 1

Havana Company's depreciation expense for the fabrication unit is $30,000, and the accumulated depreciation is $7,500.

Step-by-step explanation:

The depreciation expense is calculated using the straight-line method. The annual depreciation is determined by dividing the cost of the machine ($247,500 - $22,500 salvage value) by its useful life (3,000,000 units or eight years). Therefore, the annual depreciation expense is $30,000. Accumulated depreciation is the cumulative sum of these annual expenses, so after the first year, it would be $30,000.

Depreciation reflects the allocation of the machine's cost over its useful life, providing a systematic way to account for the wear and tear on the asset.