Question

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Application Problem 8-14A x Your answer is incorrect. Try again. A company paid $99,900 for a machine and was depreciating it by the units-of-production method. The machine was expected to produce a total of 152,000 units of product and to have a residual value of $8,700. During the first two years of use, the machine produced 57,000 units. At the beginning of the machine's third year of life, its estimated lifetime production was revised from 152,000 to 132,000 units; its estimated residual value was unchanged. Calculate the amount of depreciation that should be charged during the third year of the machine's life if 25,000 units are produced that year. (Round depreciation per unit to 2 decimal places, e.g. 15.25 and final answer to 0 decimal places, e.g. 125.) Depreciation for Year 3 17273

Answer 1

Depreciable Value = Cost - Residual Value = $99,900 - $8,700 = $91,200.00 Depreciation Per Unit = Depreciable Value/Expected Production in Life time of asset = $91,200/152,000 Units = $ 0.60 Per Unit Depreciation for first two years: = 57000 units x $0.60 Per Unit 34,200.00 For Year 3: Carrying Value Cost - Accumulated Depreciation $99,900-$34,200 $65,700 Estimated Revised life time production = 132000 Units Depreciation Per Unit (Revised) = $65700/132000 $0.50 Depreciation for Third Year = 25000 Units x $0.50 = $12500