On June 30, 2018, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2018, 24,000 units of product were produced. At the beginning of 2019, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2019, 70,000 units were produced.
-Prego would report depreciation in 2018 of:
A) $36,000.
B) $43,900.
C) $18,000.
D) $21,950.

Question

On June 30, 2018, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was $450,000 and is to be depreciated using the units-of-production method. During the six months of 2018, 24,000 units of product were produced. At the beginning of 2019, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2019, 70,000 units were produced. 
-Prego would report depreciation in 2018 of:
A) $36,000.
B) $43,900.
C) $18,000.
D) $21,950.

Quizplus · Accepted Answer

Depreciation in 2018 = ($450,000÷300,000) = $1.50 per unit × 24,000 = $36,000

On June 30, 2018, Prego Equipment Purchased a Precision Laser-Guided