Answer:
Annual depreciation= $4,620
Explanation:
Giving the following information:
Purchasing price= $37,000
Installation= $4,000
Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and the estimated salvage value is $8,000. During Year 1, the equipment produced 14,000 units.
First, we will determine the total cost consisting of the purchasing price and all costs to make the equipment operable.
Total cost= 37,000 + 4,000= $41,000
Now, to calculate the depreciation expense, we need to use the following formula:
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced
Annual depreciation= [(41,000 - 8,000)/100,000]*14,000
Annual depreciation= $4,620
