Question

On January 1, 2021, a company purchased a machine that cost $500,000 and had a residual value of $50,000. The machine is expected to produce 360,000 units and is estimated to last 10 years. If 25,000 units were produced in 2022 and 35,000 were produced in 2023, what amount of accumulated depreciation is reported at the end of 2022 using the activity-based method (rounded to the nearest whole dollar if necessary)

Answer 1

Answer:

Accumulated Depreciation expense for 2022 = $31,250

Explanation:

We know,

Depreciation expense under Unit-of-activity method = [(Cost - Salvage value) ÷ Total production during the useful life] x Usage during a period.

Given,

Purchase price = $500,000

Salvage value = $50,000

Total production during the useful life = 360,000 units

Total production during 2022 = 25,000 units

Therefore, depreciation expense for 2022 = [($500,000 - $50,000) ÷ 360,000 units] × 25,000 units

Depreciation expense = ($450,000 ÷ 360,000 units) × 25,000 units

Depreciation expense = $1.25 × 25,000 units

Accumulated Depreciation expense = $31,250