Question

Compatibility Services acquired an $80,000 machine on January 1, 20X3. The machine is estimated to have a useful life of 8 years, and a residual value of $4,000. For units-of-production depreciation purposes, the machine is expected to produce 400,000 units. Compatibility Services uses units-of-production depreciation, and the company produces 40,000 units in 20X3, what will be the depreciation expense for 20X3?

Answer 1

Answer:

Depreciation expense for 2013=$7,600

Explanation:

Depreciable cost=acquisition cost-salvage value

where;

acquisition cost=$80,000

salvage value=$4,000

replacing;

depreciable cost=80,000-4,000=$76,000

The depreciation rate per unit=depreciable cost/planned number of units

where;

depreciable cost=$76,000

expected number of units=400,000 units

replacing;

depreciation rate per unit=76,000/400,000=$0.19 per unit

depreciation expense for 2013=depreciation rate per unit×actual number of units used

depreciation rate per unit=$0.19

actual number of units used=40,000 miles

replacing;

depreciation expense for 2013=(0.19×40,000)=$7,600