The Egypt Corporation purchased a machine for $40 000 on 1 January 2012 which is expected to have a 5 year life,no residual value,and to produce a total of 20 000 ridgets before it is scrapped.Assuming the Egypt Corporation uses the units-of-production method and actual production up to 31 December 2012,the end of the accounting year)is 5 000 ridgets,calculate depreciation expense for 2012.

Question

Quizplus · Accepted Answer

Under the units-of-production method, depreciation expense is based on the actual production achieved during the accounting period. To calculate depreciation expense for 2012, we first need to determine the depreciation rate per unit:
Depreciation rate per unit = ($40,000 cost - $0 residual value) ÷ 20,000 units = $2 per unit
Then, we can calculate depreciation expense for 2012:
Depreciation expense = Depreciation rate per unit × Units produced in 2012
Depreciation expense = $2 per unit × 5,000 units produced in 2012
Depreciation expense = $10,000
Therefore, the correct answer is B) $10,000.

The Egypt Corporation Purchased a Machine for $40 000 on 1