Question

Solar Innovations Corporation bought a machine at the beginning of the year at a cost of $22,000. Assume the estimated productive life was five years and the residual value was $2,000. The estimated productive life of the machine is 10,000 units. Expected annual production was year 1, 2,000 units; year 2, 3,000 units; year 3, 2,000 units; year 4, 2,000 units; and year 5, 1,000 units. Required: Complete a depreciation schedule for the units-of-production method. Prepare the journal entry to record Year 2 depreciation.

Answer 1

The highest Depreciation Expense was recorded in Year 2  for  $6,600

Using the Units of production method, we Use the formulae

Units of Production = ( Cost of Asset / Total Machine units ) X Usage per year

Year 1 : ( 22,000 / 10,000 ) X 2,000 = $4,400

Year 2 : ( 22,000 / 10,000 ) X 3,000 =  $6,600

Year 3 : ( 22,000 / 10,000 ) X 2,000 =  $4,400

Year 4 : ( 22,000 / 10,000 ) X 2,000 =  $4,400

Year 5 : ( 22,000 / 10,000 ) X 1,000 =  $2,200

journal entry to record Year 2 depreciation.

Account titles and explanation                      Debit                 Credit

        Depreciation Expense  Year 2               $6,600

Accumulated Depreciation                                                       $6,600

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