A business purchased equipment for $52,500 in March of the current year.The machine is expected to provide useful output of 100,000 units over its expected useful life.At the end of its useful life,the machine has an expected residual value of $2,500.Actual output for the current year was 35,000 units.The current year depreciation expense is $17,500.

Question

Quizplus · Accepted Answer

The annual depreciation expense can be calculated using the straight-line method:
Depreciation expense = (cost - residual value) / useful output
Depreciation expense = ($52,500 - $2,500) / 100,000 = $0.50 per unit

Since the actual output for the current year was 35,000 units, the current year depreciation expense would be:
Depreciation expense = 35,000 units x $0.50 per unit = $17,500

Therefore, the given depreciation expense of $17,500 for the current year is correct.

A Business Purchased Equipment for $52,500 in March of the Current