Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000.The machine's useful life is estimated to be 5 years,or 400,000 units of product,with a $7,000 salvage value.During its second year,the machine produces 84,500 units of product.What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?
A)Debit Depletion Expense $16,900;credit Accumulated Depletion $16,900.
B)Debit Depletion Expense $16,000;credit Accumulated Depletion $16,000.
C)Debit Depreciation Expense $16,900;credit Accumulated Depreciation $16,900.
D)Debit Depreciation Expense $16,000;credit Accumulated Depreciation $16,000.
E)Debit Amortization Expense $16,900;credit Accumulated Amortization $16,900.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on the actual usage of the asset. To calculate the depreciation expense, we first need to determine the cost per unit of production. This is calculated as (cost - salvage value) / total estimated units of production = ($87,000 - $7,000) / 400,000 = $0.20.

To record the machine's second year depreciation, we need to multiply the cost per unit of production by the actual units produced in that year: $0.20 x 84,500 = $16,900. This amount would be recorded with a debit to Depreciation Expense and a credit to Accumulated Depreciation. Choice C is the only one that accurately reflects this journal entry.

Wickland Company Installs a Manufacturing Machine in Its Production Facility