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7. Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the...

7. 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.

Required:Determine the machine’s second-year depreciation under the:

  • straight-line

  • units-of-production

Assume that the machine was installed on March 1 of the current year.  

Using the straight-line method of depreciation, what would the first year depreciation expense be?

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Answer #1

7a) Second year Depreciation :

Straight line = (43500-5000)/10 = 3850

Units of production = (43500-5000/385000)*32500 = 3250

b) Straight line depreciation = 3850*10/12 = 3208

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