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Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $141,000. The machine's useful life is estimated to be 20 years, or 400,000 units of product, with a $9,000 salvage value. During its second year, the machine produces 16,000 units of product. Determine the machines' second year depreciation under the units-of-production method. (Do not round intermediate calculations.)Multiple Choice$7,500.$6,600.$7,050.$5,280.$5,640.

Question

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of 141,000.Themachine′susefullifeisestimatedtobe20years,or400,000unitsofproduct,witha141,000. The machine's useful life is estimated to be 20 years, or 400,000 units of product, with a 9,000 salvage value. During its second year, the machine produces 16,000 units of product. Determine the machines' second year depreciation under the units-of-production method. (Do not round intermediate calculations.)Multiple Choice7,500.7,500.6,600.7,050.7,050.5,280.$5,640.

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Solution

To calculate the depreciation under the units-of-production method, we first need to determine the depreciation rate per unit.

Step 1: Subtract the salvage value from the cost of the machine to get the total depreciable cost. 141,000−141,000 - 9,000 = $132,000

Step 2: Divide the total depreciable cost by the total number of units the machine is expected to produce over its lifetime. 132,000/400,000units=132,000 / 400,000 units = 0.33 per unit

Step 3: Multiply the depreciation rate per unit by the number of units produced in the second year. 0.33∗16,000units=0.33 * 16,000 units = 5,280

So, the machine's second year depreciation under the units-of-production method is $5,280.

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