Cesario Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 15,000 units. To the nearest dollar, the depreciation for the first year under the units of production method will be:

Question

Quizplus · Accepted Answer

Under the units of production method, depreciation expense is calculated by dividing the depreciable cost (cost - salvage value) by the expected total units of production and then multiplying that rate by the actual units produced in the current period.

Depreciable cost = $125,000 - $10,000 = $115,000
Depreciation rate = $115,000 / 50,000 units = $2.30 per unit
Depreciation expense = $2.30 * 15,000 units = $34,500

Therefore, the depreciation for the first year under the units of production method will be $34,500, which is closest to option C ($34,500).

Cesario Corporation Purchases a Machine for $125,000