Question

Copy equipment was acquired at the beginning of the year at a cost of $72,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. It is estimated that the machine will output an estimated 1,000,000 copies. This year, 315,000 copies were made. Determine the (a) depreciable cost, (b) depreciation rate, and (c) the units-of-output depreciation for the year. Round "depreciation rate" to three decimal places.

Answer 1

Answer:

a) $ 63,000.

b) $ 0.063 per copy produced.

c) $19,845.

Explanation:

A : Determining the depreciable Cost.

The depreciable Cost = Acquisition cost - Salvage/Residual Value

The depreciable Cost = $72,000 -  $9,000

The depreciable Cost =  $ 63,000.

B: Determining the depreciation rate.

The depreciation rate = Depreciable cost/Total no. of units produced during useful life

The depreciation rate = $ 63,000/1,000,000

The depreciation rate = $ 0.063 per copy produced.

B: Determining the units-of-output depreciation for the year.

The units-of-output depreciation for the year = depreciation rate × the number of units produced for the year.

The units-of-output depreciation for the year =  0.063 × 315,000

The units-of-output depreciation for the year = $19,845.