jay corp. bought machine for 15000. machine is expected to produce 10000 units. machine has residual value of 5000. assuming machine produces 400 units during year 1.what should depreciation expense be
To calculate the depreciation expense for year 1, you need to determine the depreciable base and the number of units to be produced.
First, calculate the depreciable base:
Depreciable Base = Cost of the Machine – Residual Value
Depreciable Base = $15,000 - $5,000
Depreciable Base = $10,000
Next, calculate the depreciation expense per unit:
Depreciation Expense per Unit = Depreciable Base / Number of Units
Depreciation Expense per Unit = $10,000 / 10,000 units
Depreciation Expense per Unit = $1.00
Finally, calculate the depreciation expense for 400 units produced in year 1:
Depreciation Expense = Depreciation Expense per Unit * Number of Units Produced
Depreciation Expense = $1.00 * 400 units
Depreciation Expense = $400
To calculate the depreciation expense for the machine, we will use the straight-line depreciation method. This method evenly allocates the cost of an asset over its useful life.
First, we need to calculate the depreciable cost of the machine, which is the initial cost minus the residual value. Let's do the calculation:
Depreciable Cost = Initial Cost - Residual Value
Depreciable Cost = $15,000 - $5,000
Depreciable Cost = $10,000
Next, we need to determine the useful life of the machine. In this case, the machine is expected to produce 10,000 units throughout its life. Therefore, we can calculate the machine's productivity per unit:
Productivity per Unit = Initial Cost / Total Units
Productivity per Unit = $15,000 / 10,000
Productivity per Unit = $1.50
Now, we can calculate the depreciation expense for the first year, using the machine's productivity per unit and the number of units it produced:
Depreciation Expense = Productivity per Unit x Units Produced
Depreciation Expense = $1.50 x 400
Depreciation Expense = $600
Therefore, the depreciation expense for the first year should be $600.