On January 1,a Machine Costing $260,000 with a Four-Year Life

question 81

Essay

On January 1,a machine costing $260,000 with a four-year life and an estimated $5,000 salvage value was purchased.It was also estimated that the machine would produce 500,000 units during its life.The actual units produced during its first year of operation were 110,000.Determine the amount of depreciation expense for the first year under each of the following assumptions:
a.The company uses the straight-line method of depreciation.
b.The company uses the units-of-production method of depreciation.
c.The company uses the double-declining-balance method of depreciation.

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Definitions:

Cumulative Output

The total amount of product or work produced over a specific period.

Fixed Percent

A predetermined percentage rate applied in various financial and operational contexts, such as investment returns or budget allocations.

Varying Percent

Describes the difference in percentage rates, often used in finance and statistics, to compare changes over time or between different entities.

Experience Curve

A concept indicating that as a company gains experience in producing a product, its cost of production decreases due to efficiencies and learning effects.