Centennial owns a machine that it purchased on Jan 1, 2019 for $400,000. The machine had an estimated useful life of 10 years with a production capacity for 80,000 units and was expected to have no residual value. The company uses the units-of-production method to record depreciation. The machine produced 15,000 units in 2019, 18,000 units in 2020 and 25,000 units in 2021. The machine was sold on December 30, 2021 for $350,000. What was the accumulated depreciation at December 31, 2019?

Question

Quizplus · Accepted Answer

Annual depreciation expense = Total cost / Total estimated production capacity
Depreciation expense per unit = Total cost / Total estimated production capacity
Depreciation expense for 2019 = (400,000 / 80,000) x 15,000 = $75,000
Accumulated depreciation at December 31, 2019 = Depreciation expense for 2019 = $75,000.

Centennial Owns a Machine That It Purchased on Jan 1