Question

In January of this year, Amazon bought a machine for $220,000. The machine has a useful life of 10 years and a salvage value of $60,000. Amazon uses the units of production method to depreciate this machine. Yamazon estimates that the machine will be used for 800,000 machine hours. In May, the equipment was used for 5,000 hours. Record the depreciation entry for May:

Answer 1

Answer:

Depreciation expense for May $1000

Explanation:

The depreciation expense is the systematic allocation of the cost of asset over the estimated useful of the asset. The units of production method of depreciation allocates the depreciation based on the level of activity for which the asset is used in a particular year divided by the activity expected throughout the useful life of the asset.

The depreciation is calculated as follows,

Depreciation expense = (Cost - Salvage value) * Activity in units for the period/Activity in units over the total estimated useful life of the asset

Depreciation expense - May = (220000 - 60000) * 5000/800000

Depreciation expense - May = $1000