The Doodad Company purchases a machine for $400,000.The machine has an estimated residual value of $20,000.The company expects the machine to produce two million units.The machine is used to make 400,000 units during the current period.
-Use the information above to answer the following question.If the units-of-production method is used,the depreciation expense for this period is:
A) $80,000.
B) $400,000.
C) $76,000.
D) $380,000.

Question

Quizplus · Accepted Answer

To calculate the depreciation expense using the units-of-production method, we need to first calculate the depreciation rate per unit.
Depreciation rate per unit = (Cost of Asset – Salvage Value) / Total Units of Production
= ($400,000 – $20,000) / 2,000,000 units
= $0.19 per unit

Depreciation expense for the current period = Depreciation rate per unit x Units produced in the current period
= $0.19 per unit x 400,000 units
= $76,000

Therefore, the depreciation expense for this period is $76,000, which corresponds to Choice C.

The Doodad Company Purchases a Machine for $400,000