Cheshire Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 100,000 units in its lifetime. During the first year of operation, it produced 15,500 units. To the nearest dollar, the depreciation for the first year under the units of production method will be: (Round intermediary calculations to the nearest cent, and the final answer to the nearest dollar.)

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enyo enyo · Answer 1 · 2019-08-23T09:04:47+02:00

Answer: Depreciation for the first year = 17825

Explanation:

Given:

Machine purchased for $125,000

Salvage value of $10,000

Output = 100,000

First year of operation, Output = 15500

First, we'll evaluate depreciation per unit over the entire life of the machine:

i.e. [tex]Depreciation\ per\ unit = \frac{ Purchasing\ cost - Salvage\ value}{Total\ units\ produced}[/tex]

Depreciation per unit = [tex]\frac{125000 - 10000}{100000}[/tex]

Depreciation per unit = 1.15

Now, we'll compute the depreciation for the first year:

Depreciation for the first year = Depreciation per unit × Output (first year)

Depreciation for the first year = 1.15 × 15500

Depreciation for the first year = 17825

Dryomys Dryomys · Answer 2 · 2019-08-23T13:13:38+02:00

Answer: $17,825

Explanation:

Given that,

Purchases a machine = $125,000

Estimated salvage value = $10,000

Expected to produce = 100,000 units in its lifetime

Produced (during first year) = 15,500 units

Depreciable cost = Cost of machine - salvage value

= $125,000 - $10,000

= $115,000

Depreciation for first year = Depreciable cost × [tex]\frac{Produced\ during\ first\ year}{Expected\ to\ produce}[/tex]

= 115,000 × [tex]\frac{15,500}{100,000}[/tex]

= $17,825