Question

mohr company purchases a machine at the beginning of the year at a cost of $29,000. the machine is depreciated using the units-of-production method. the company estimates it will use the machine for 5 years, during which time it anticipates producing 55,000 units. the machine is estimated to have a $7,000 salvage value. the company produces 9,500 units in year 1 and 6,500 units in year 2. depreciation expense in year 2 is:

Answer 1

The depreciation expense of year 2 for Mohr company using units-of-production method is $827.28.

Cost of asset = $29,000

No of units produced during year 2 = 6,500

salvage value = $7,000

anticipated production = 55,000 units

Depreciation expense in year 2 = cost of asset- salvage value/ anticipated production * no of units produced in year 2

Depreciation expense = $29,000-$7000/ 55,000*6500 = $827.28

Depreciation is an accounting concept for spreading out the expenditure of a tangible item over the duration of its useful life. The amount of an income statement has already been used is demonstrated by depreciation. It enables business owners to buy inventory over a specified period of time and generate income from those assets.

The initial cost of possession is greatly lowered because businesses do not have to fully account for them in the year that the assets are purchased. A company's profits can be significantly impacted by not accounting for depreciation. 

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