Question

Marshall Company purchases a machine for $480,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce four million units. The machine is used to make 560,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:_____.

a. $38,500.b. $700,000.c. $660,000.d. $35,000.

Answer 1

The correct answer is not in the answer options. Depreciation expense = $61,600

Step-by-step explanation:

Cost of machine = $480000

Residual value = $40,000

The machine is expected to make 4,000,000 units. This is it's useful life.

It makes 560,000 during current period

We solve for depreciation

Depreciation = (machine cost - residual value)/useful life

= $480,000-$40,000/4,000,000

= 440,000/4,000,000

= 0.11

Depreciation expense = 0.11 x 560,000

= $61600