 Business
5 April, 08:07

# A company purchased a machine for \$140,000 with a useful life of 8 years and a residual value of \$10,000. It is estimated that the machine could produce 80,000 units over its useful life. In the first year, 17,000 units were produced. In the second year 15,000 units were produced. What is the amount of accumulated depreciation at the end of the second year?

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1. 5 April, 08:37
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The amount of accumulated depreciation at the end of the second year is \$49,700.

Explanation:

Determining the depreciable cost

Determine the depreciable cost = Acquisition - Residual value.

The depreciable cost = 140,000 - 10,000.

The depreciable cost = \$130,000.

Determining the depreciation rate per unit

The depreciation rate per unit = depreciable cost / No. of activity units

replacing:

The depreciation rate per unit = 130,000 / 80,000

The depreciation rate per unit = \$1.6 per activity unit.

Determining the amount of accumulated depreciation

The depreciation expense for year 1 = Activity units in year 1 * depreciation rate per unit.

The depreciation expense for year 1 = 17,000 * 1.6

The depreciation expense for year 1 = \$27,200.

The depreciation expense for year 2 = Activity units in year 2 * depreciation rate per unit.

The depreciation expense for year 2 = 15,000 * 1.6.

The depreciation expense for year 2 = \$22,500.

The amount of accumulated depreciation = depreciation expense for year 1 + depreciation expense for year 2.

The amount of accumulated depreciation = 27,200 + 22,500.

The amount of accumulated depreciation = \$49,700.