Question

on june 30, 2021, prego equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. the cost of the machine was $450,000 and is to be depreciated using the units-of-production method. during the six months of 2021, 24,000 units of product were produced. at the beginning of 2022, engineers estimated that the machine can realistically be used to produce only another 230,000 units. during 2022, 70,000 units were produced. prego would report depreciation in 2021 of:

Answer 1

Prego Equipment would report a depreciation expense of $36,000 for the last six months of 2021 for the precision laser-guided steel punch, calculated using the units-of-production depreciation method.

Step-by-step explanation:

The student asked about the depreciation expense for a precision laser-guided steel punch purchased by Prego Equipment for $450,000 with a capacity of 300,000 units and no residual value, using the units-of-production method. Since the machine produced 24,000 units in the six months of 2021, we calculate the depreciation expense for that period. To find the depreciation rate per unit, divide the cost of the machine by the original estimated total units of production.

The calculation is as follows:

Depreciation rate per unit = Cost of the machine / Estimated total units of production

Depreciation rate per unit = $450,000 / 300,000 units

Depreciation rate per unit = $1.50 per unit

Now, we multiply the depreciation rate per unit by the number of units produced in 2021 to find the depreciation expense:

Depreciation expense for 2021 = Depreciation rate per unit * Units produced in 2021

Depreciation expense for 2021 = $1.50 per unit * 24,000 units

Depreciation expense for 2021 = $36,000

Therefore, Prego Equipment would report a depreciation expense of $36,000 for 2021.