Melbourne Manufacturing purchased a machine for $60 000 on 1 January 2015 which is expected to have a 5 year life, no residual value, and to produce a total of 20 000 wingdings before it is scrapped. Assuming the Melbourne Manufacturing uses the units- of-production method and actual production up to 31 December 2015, (the end of the accounting year) is 5000 wingdings, calculate depreciation expense for 2015.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on actual usage. The cost per wingding is $60,000 / 20,000 = $3. With 5,000 wingdings produced, depreciation is 5,000 * $3 = $15,000.

Melbourne Manufacturing Purchased a Machine for $60 000 on 1