Question

On January 1, 2021, a company purchased a machine that cost $500,000 and had a residual value of $50,000. The machine is expected to produce 360,000 units and is estimated to last 10 years. If 25,000 units were produced in 2022 and 35,000 were produced in 2023, what amount of accumulated depreciation is reported at the end of 2022 using the activity-based method (rounded to the nearest whole dollar if necessary)

Answer 1

Using the activity-based method, the accumulated depreciation for the machine at the end of 2022 is $31,250, calculated by multiplying the depreciation expense per unit of $1.25 by the number of units produced in 2022, which was 25,000 units.

Step-by-step explanation:

To calculate the accumulated depreciation using the activity-based method, also known as the units of production method, you need to determine the depreciation expense per unit. First, subtract the residual value from the cost of the machine to get the total amount that will be depreciated over the life of the machine:

$500,000 - $50,000 = $450,000

Next, divide the total depreciable amount by the estimated total units of production to get the depreciation expense per unit:

$450,000 / 360,000 units = $1.25 per unit

For the year 2022, 25,000 units were produced, so the depreciation expense for that year is:

25,000 units * $1.25 per unit = $31,250

Since 2022 is the first year of the machine's operation being considered, the accumulated depreciation at the end of 2022 would be the same as the depreciation expense for the year:

Accumulated Depreciation at the End of 2022: $31,250