Question

A company purchased a weaving machine for $198,250. The machine has a useful life of 8 years and a residual value of $10,500. It is estimated that the machine could produce 751,000 bolts of woven fabric over its useful life. In the first year, 105,500 bolts were produced. In the second year, production increased to 109,500 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year

Answer 1

the depreciation expense that should be recorded for the second year is $27,375

Step-by-step explanation:

The computation of the amount of depreciation expense that should be recorded for the second year is shown below

Depreciation rate is

= ($198,250 - $10,500) ÷ 751000

= 0.25 per bolt

Now Depreciation expense for the second year

= $109,500 × .25

= $27,375

hence, the depreciation expense that should be recorded for the second year is $27,375