Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 residual value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the units-of-production method.
A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

Question

Quizplus · Accepted Answer

Depreciation = (Cost - Residual Value) x Units Produced / Total Estimated Units= (87,000 - 7,000) x 84,500 / 400,000= $16,900

Salta Company Installs a Manufacturing Machine in Its Factory at the Beginning