Question

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. What journal entry would be needed to record the machines' first year depreciation under the units-of-production method? Multiple Choice 0 Debit Depletion Expense $25,800; credit Accumulated Depletion $25,800 0 Debit Depreciation Expense $29,025, credit Accumulated Depreciation $29,025 0 Debit Amortization Expense $24,000; credit Accumulated Amortization $24,000. 0 Debit Depreciation Expense $25,800; credit Accumulated Depreciation $25,800. 0 Debit Depletion Expense $29,025, credit Accumulated Depletion $29,025

Answer 1

Depreciation expense per unit = ( Cost of machine - Salvage value)/ Estimated production units

= (135,000-15,000)/300,000

= 120,000/300,000

= $0.40

Depreciation expense for Year 1 = Depreciation expense per unit x units produced

= 0.40 x 64,500

= $25,800

Journal
General Journal	Debit	Credit
Depreciation expense	$25,800
Accumulated depreciation		$25,800

Fourth option is correct option.

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