AccountingPro purchased equipment on January 1, 2019 for $275,000. The asset's useful life was estimated at 5 years or 10,000 units of output, with no residual value. The company has a December 31 year end. Additional Information
$$\begin{array} {| l | l |}
\hline \text { Year } & \text { Units of Output } \
\hline 2019 & 2,100 \
\hline 2020 & 2,000 \
\hline 2021 & 1,700 \
\hline 022 & 2,300 \
\hline 2023 & 1,900 \
\hline
\end{array}$$ Assuming the company uses the units-of-production depreciation method, what is the depreciation rate per unit for 2023?

Question

AccountingPro purchased equipment on January 1, 2019 for $275,000. The asset's useful life was estimated at 5 years or 10,000 units of output, with no residual value. The company has a December 31 year end. Additional Information
$$\begin{array} {| l | l |} 
\hline \text { Year } & \text { Units of Output } \
\hline 2019 & 2,100 \
\hline 2020 & 2,000 \
\hline 2021 & 1,700 \
\hline 022 & 2,300 \
\hline 2023 & 1,900 \
\hline
\end{array}$$ Assuming the company uses the units-of-production depreciation method, what is the depreciation rate per unit for 2023?

Quizplus · Accepted Answer

First, we need to calculate the total units of output over the life of the asset:

2,100 + 2,000 + 1,700 + 2,300 + 1,900 = 10,000 units

Next, calculate the depreciation rate per unit:

Depreciation rate per unit = (Cost of asset - Residual value) / Total units of output
Depreciation rate per unit = ($275,000 - $0) / 10,000 units
Depreciation rate per unit = $27.50 per unit

Finally, we need to calculate the depreciation expense for 2023:

Depreciation expense for 2023 = Depreciation rate per unit x Units of output in 2023
Depreciation expense for 2023 = $27.50 x 1,900 units
Depreciation expense for 2023 = $52,250

Therefore, the answer is B.

AccountingPro Purchased Equipment on January 1, 2019 for $275,000 Assuming the Company Uses the Units-Of-Production Depreciation Method, What Is