Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000.The machine's useful life is estimated to be 5 years,or 300,000 units of product,with a $15,000 salvage value.During its first year,the machine produces 64,500 units of product.Determine the machines' first year depreciation under the units-of-production method.
A)$27,000.
B)$54,000.
C)$24,000.
D)$25,800.
E)$48,000.

Question

Quizplus · Accepted Answer

To calculate the depreciation expense of the machine in its first year, we must first determine the depreciation rate per unit, which is calculated as:

Depreciation rate per unit = (Cost of machine – Salvage value) / Estimated total units of production
Depreciation rate per unit = ($135,000 – $15,000) / 300,000 = $0.40 per unit

Next, we can calculate the depreciation expense for the first year by multiplying the depreciation rate per unit by the actual number of units produced:

Depreciation expense = Depreciation rate per unit × Actual units produced
Depreciation expense = $0.40 × 64,500 = $25,800

Therefore, the correct answer is D) $25,800.

Minor Company Installs a Machine in Its Factory at the Beginning