Question

A company purchased a weaving machine for $350,170. The machine has a useful life of 8 years and a residual value of $19,500. It is estimated that the machine could produce 769,000 bolts of woven fabric over its useful life. In the first year, 114,500 bolts were produced. In the second year, production increased to 118,500 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year

Answer 1

$50955

Step-by-step explanation:

Purchase value = $350170

Residual value = $19500

Total Production = $769000

Increase in production = $118500

Depreciation expense for second year = (Purchase value - Residual value)/Total Production * Increase in Production

Depreciation expense for second year = ($350170 - $19500 / $769000) * $118500

Depreciation expense for second year = $330670 / $769000 * $118500

Depreciation expense for second year = $50955