Question

Idaho Inc. acquired a piece of machinery on January 1, 2010. The total cost of the machinery was $108,400. Idaho estimated that the machinery would be used to produce 100,000 units of product before being sold for an estimated $18,600 at the end of 10 years. Idaho uses the units-of-production method of depreciation. Assuming the machine produced 12,000 units in year 2010, 9,000 units in year 2011, and 10,500 units in year 2012, what was the balance of accumulated depreciation at year-end 2012 ?

Answer 1

$28,287

Step-by-step explanation:

The accumulated depreciation is the total depreciation from the date the asset became available for use to present.

Using the units of production, the accumulated depreciation is a proportion of the depreciable value of the asset assigned based on the ratio of the total units produced to the total units to be produced.

The depreciable value of the asset is the difference between the cost and the salvage value of the asset

= $108,400 - $18,600

= $89,800

Total units produced as at end of 2012

= 9,000 + 10,500 +12,000

= 31,500

Hence the balance of accumulated depreciation at year-end 2012

= 31,500/100,000 * $89,800

= $28,287