: Cost of machine $ 90,400 Residual value $ 3,400 Useful life 5 years Estimated units machine will produce 100,000 Actual production: Year 1 Year 2 54,000 11,500 Use MACRS table. Depreciation Expense Method Year 1 Year 2 what is the Units of production Declining balance $
To determine the depreciation expense using the Units of Production Declining Balance method, you'll need to follow these steps:
Step 1: Calculate the depreciation rate per unit.
Depreciation Rate per Unit = (Cost of Machine - Residual Value) / Estimated Total Units of Production
Given:
Cost of Machine = $90,400
Residual Value = $3,400
Estimated Total Units of Production = 100,000
Depreciation Rate per Unit = ($90,400 - $3,400) / 100,000
Depreciation Rate per Unit = $87,000 / 100,000
Depreciation Rate per Unit = $0.87 per unit
Step 2: Calculate the depreciation expense for each year.
Year 1:
Depreciation Expense (Year 1) = Depreciation Rate per Unit * Actual Production (Year 1)
Given:
Actual Production (Year 1) = 54,000
Depreciation Expense (Year 1) = $0.87 * 54,000
Depreciation Expense (Year 1) = $46,980
Year 2:
Depreciation Expense (Year 2) = Depreciation Rate per Unit * Actual Production (Year 2)
Given:
Actual Production (Year 2) = 11,500
Depreciation Expense (Year 2) = $0.87 * 11,500
Depreciation Expense (Year 2) = $10,005
So, the depreciation expenses for Year 1 and Year 2 using the Units of Production Declining Balance method are $46,980 and $10,005 respectively.