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25 March, 09:09

The sahara company purchased equipment on january 1, 2015, for $100,000. the equipment had an estimated residual value of $10,000, an estimated useful life of five years, and estimated lifetime output of 18,000 units. in 2016, the company produced 4,400 units and recorded depreciation expense of $22,000. what depreciation method did the company use?

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  1. 25 March, 09:30
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    The company used straight line depreciation based on number of units produced. This can be shown as follows:

    Cost = $100,000

    Life = 5 years or 18,000 units

    Salvage value = $10,000

    By straight line method;

    Depreciation cost per unit = (100,000-10,000) / 18,000 = $5

    After producing 4,400 units, depreciation expense = 4,400*5 = $22,000.
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