Forwind Ltd has recently acquired a machine that cost $29 000.The machine normally remains productive for 6 years.It is expected to continue in the production process at Forwind for 8 years due to the excellent maintenance and operating policies in place at Forwind.The machine has the capacity to produce 20 000 units over a 6 year life and 27 000 units over an 8 year life.Its salvage value after 6 years is expected to be $2500 and after 8 years $1000.What depreciation would be charged in the first year of the machine's operation when 4000 units were produced (rounded to the nearest dollar)?

Question

Quizplus · Accepted Answer

The depreciation is calculated using the units of production method. First, find the total depreciation expense: Cost - Salvage Value = $29,000 - $1,000 = $28,000. Then, calculate the depreciation per unit: $28,000 / 27,000 units = $1.037 per unit. For 4,000 units produced in the first year, the depreciation is 4,000 * $1.037 = $4,148 (rounded to the nearest dollar).

Forwind Ltd Has Recently Acquired a Machine That Cost $29