Compatibility Services acquired an $80,000 machine on January 1,20X3.The machine is estimated to have a useful life of 8 years,and a residual value of $4,000.For units-of-production depreciation purposes,the machine is expected to produce 400,000 units.If Compatibility Services uses units-of-production depreciation and the company produces 40,000 units in 20X3; 60,000 units in 20X4; and 50,000 units in 20X5; what is the depreciation expense in 20X5?
A)$ 28,500
B)$12,000
C)$10,000
D)$9,500
E)$11,400

Question

Quizplus · Accepted Answer

The depreciation expense for 20X5 using the units-of-production method is calculated by first determining the depreciation rate per unit, which is (Cost - Residual Value) / Total Estimated Production = ($80,000 - $4,000) / 400,000 units = $0.19 per unit. Then, for 20X5, with 50,000 units produced, the depreciation expense is 50,000 units * $0.19/unit = $9,500.

Compatibility Services Acquired an $80,000 Machine on January 1,20X3