A company purchased a rope braiding 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 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year?
A) $25,200.
B) $26,160.
C) $26,660.
D) $27,613.
E) $53,160.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on the units produced in a year. The total depreciable cost is $190,000 - $10,000 = $180,000. The depreciation per unit is $180,000 / 750,000 units = $0.24 per unit. For the second year, with 109,000 units produced, the depreciation is 109,000 units * $0.24 = $26,160.

A Company Purchased a Rope Braiding Machine for $190,000