Question

On January 1, 20x1, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated salvage value of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 20x1 and 12,000 in 20x2. What is depreciation expense for 20x1 if the company uses units-of-production depreciation

Answer 1

$12,000

Step-by-step explanation:

total value to be depreciated over 6 years = machine's cost - salvage value = $40,000 - $4,000 = $36,000

the unit of depreciation we are going to use is machine hours:

depreciation cost per machine hour = $36,000 / 24,000 total machine hours = $1.50 per machine hour

depreciation expense for 20x1 = 8,000 hours x $1.5 per machine hour = $12,000