Marshall Company purchases a machine for $800,000.The machine has an estimated residual value of $40,000.The company expects the machine to produce two million units.The machine is used to make 400,000 units during the current period. If the units-of-production method is used,the depreciation expense for this period is:
A)$160,000.
B)$800,000.
C)$152,000.
D)$760,000.

Question

Quizplus · Accepted Answer

Depreciation expense = (Cost − Residual value)× (Actual production this period ÷ Estimated total production)
= ($800,000 − $40,000)× (400,000 units ÷ 2,000,000 units)= $152,000

Marshall Company Purchases a Machine for $800,000