Assume that Alabama Company purchased factory equipment on January 1, 2015, for $75,000. The equipment has an estimated life of five years and an estimated residual value of $6,000. Alabama's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 5,000 units in 2015, but production subsequent to 2015 will increase by 5,000 units each year.
REQUIRED:
Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Would the units-of production method yield reasonable results in this situation? Explain.

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The Answer of Assume that Alabama Company purchased factory equipment on January 1, 2015, for $75,000. The equipment has an estimated life of five years and an estimated residual value of $6,000. Alabama's accountant is considering whether to use the straight-line or the units-of-production method to depreciate the asset. Because the company is beginning a new production process, the equipment will be used to produce 5,000 units in 2015, but production subsequent to 2015 will increase by 5,000 units each year.
REQUIRED:
Calculate the depreciation expense, accumulated depreciation, and book value of the equipment under both methods for each of the five years of its life. Would the units-of production method yield reasonable results in this situation? Explain.

Assume That Alabama Company Purchased Factory Equipment on January 1