Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $43,500. The machine's useful life is estimated at 10 years, or 385,000 units of product, with a $5,000 salvage value. During its second year, the machine produces 32,500 units of product.
Determine the machine's second-year depreciation under the straight-line method.

Answer 1

Answer:

$3,850

Explanation:

The computation of the machine's second-year depreciation under the straight-line method is shown below:

= (Cost of the machine - salvage value) ÷ (estimated useful life)

= ($43,500 - $5,000) ÷ (10 years)

= ($38,500) ÷ (10 years)  

= $3,850

In this method, the depreciation is the same for all the remaining useful life. Therefore, for the second year also, the depreciation expense is the same i.e $3,850