Question

On January 1, 2018, Truesdale, Inc., purchased a piece of machinery for use in operations. The total acquisition cost was $33,000. The machine was expected to produce a total of 60,000 units during its life. The machine actually produced 16,000 units during 2018, 23,000 units during 2019, and 21,000 units during 2020. The machine has a salvage value of $3,000. Using the units-of-production method, the amount of depreciation that should be recorded during 2018, is approximately A. $8,000 B. $10,000 C. $8,800 D. $11,000

Answer 1

A. $8,000

Step-by-step explanation:

For computing the amount of depreciation expenses, first, we need to find out the depreciation expense per unit which is shown below:-

Depreciation expense per unit = (Total acquisition cost - Salvage value) ÷ Total units

= ($33,000 - $3,000) ÷ 60,000

= $30,000 ÷ 60,000

= 0.50 per unit

Amount of depreciation expenses = Actual Machine produced × Depreciation expense per unit

= 16,000 × 0.50

= $8,000

Therefore for computing the depreciation expenses we simply multiply the actual machine produced with depreciation expense per unit.