On January 1, 2013, Innovative Manufacturing Company purchased equipment with a list price of $22,000 with a 5% cash discount. A total of $1,000 was paid for installation and testing. During the first year, Innovative paid $1,500 for insurance on the equipment and another $550 for routine maintenance and repairs. Innovative uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $2,000. During 2013, the equipment produced 13,000 units. What is closest to the amount of depreciation for the year?
A)$2,847
B)$2,587
C)$3,042
D)$2,782

Question

Quizplus · Accepted Answer

$22,000 list price - ($22,000 x 5%) discount + $1,000 installation = $21,900 cost of machine; ($21,900 - $2,000 salvage value)/100,000 = $0.199 per unit; $0.199 x 13,000 = $2,587 depreciation expense

On January 1, 2013, Innovative Manufacturing Company Purchased Equipment with a List