A company paid $93,500 for a machine and was depreciating it by the units-of-pro

Question

A company paid $93,500 for a machine and was depreciating it by the units-of-production method. The machine was expected to produce a total of 159,000 units of product, and to have a residual value of $8,500. During the first two years of use, the machine produced 55,000 units. At the beginning of the machine's third year of life, its estimated lifetime production was revised from 159,000 to 120,000 units; its estimated residual value was unchanged. Calculate the amount of depreciation that should be charged during the third year of the machine's life if 25,000 units are produced that year.

Explanation / Answer

0.534591 Depr./unit 29402.52 Depr. For 2 yrs 55597.48 Remaining life 0.855346 Depr./unit as per new units of 120000 21383.65 Depr. For 25000 units

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