Question

On January 1, 2021, the Allegheny Corporation purchased equipment for $162,000. The estimated service life of the equipment is 10 years and the estimated residual value is $8,000. The equipment is expected to produce 350,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. 3. Units of production (units produced in 2021, 47,000; units produced in 2022, 42,000). (Round "Depreciation per unit rate" answers to 2 decimal places.)

Answer 1

a. Depreciation expenses in 2021 is 15,400 and depreciation expenses in 2022 is also $15,400.

b. depreciation expenses in 2021 is 20,680, while depreciation expenses in 2022 is also $18,480.

Step-by-step explanation:

Depreciable amount = Purchase price - Residual value = $162,000 - $8,000 = $154,000

a. Using a straight line method

Annual deprecation expense = $154,000 / 10 = $15,400

Therefore, depreciation expenses in 2021 is 15,400 and depreciation expenses in 2022 is also $15,400.

b. Using unit of production method

2021 depreciation expenses = (47,000 / 350,000) * $154,000 = $20,680

2022 depreciation expenses = (42,000 / 350,000) * $154,000 = $18,480.