Question

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. What journal entry would be needed to record the machines' second year depreciation under the units-of-production method?
Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000.

Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900.

Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900.

Debit Amortization Expense $16,900; credit Accumulated Amortization $16,900.

Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.

Answer 1

Answer:

Option (c) is correct.

Explanation:

Depreciable value of machine:

= Cost of machine - salvage value

= $87,000 - $7,000

= $80,000

Depreciation of second year:

= ($80,000 ÷ 400,000) × 84500

= $16,900

Therefore, the journal entry is as follows:

Depreciation Expenses A/c Dr. $16,900

      To accumulated depreciation           $16,900

(To record the machines' second year depreciation)