Question

A company purchased a weaving machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 bolts of woven fabric over its useful life. In the first year, 105,000 bolts were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation expense that should be recorded for the second year?

Answer 1

Answer: $26,160

Explanation:

Depreciation expense per bolt = (Original cost - Residual Value) / Number of bolts estimated to produce

= ($190,000 - $10,000) / 750,000 bolts

= $0.24 per bolt

Depreciation (for 2 year) = Depreciation expense per bolt * Number of bolts produce in year 2

= $0.24 * 109,000 bolts

= $26,160