Question

A company purchased a weaving machine for $341,560. The machine has a useful life of 8 years and a residual value of $19,000. It is estimated that the machine could produce 768,000 bolts of woven fabric over its useful life. In the first year, 114,000 bolts were produced. In the second year, production increased to 118,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?
A.) $49,560.
B.) $50,700.
C.) $97,440.
D.) $52,479.
E.) $47,880.

Answer 1

Answer:

amount of depreciation expense  = $49,560

so correct option is A.) $49,560

Explanation:

given data

purchased cost = $341,560

useful life = 8 years

residual value = $19,000

machine produce = 768,000 bolts

1st year produced = 114,000 bolts

2nd year production increased = 118,000 units

to find out

amount of depreciation expense that should be recorded for the second year

solution

we get here amount of depreciation expense for 2nd year that is express as

amount of depreciation expense = ( purchased cost - residual value )  × 2nd year production increased  ÷ machine produce    ......................1

put here value we get

amount of depreciation expense = $341,560 - $19,000 × $\frac{118,000}{768,000}$

amount of depreciation expense  = $49,560

so correct option is A.) $49,560