The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:
A) $80,000.
B) $400,000.
C) $76,000.
D) $380,000.

Question

Quizplus · Accepted Answer

To calculate depreciation expense using the units-of-production method, we use the following formula:

Depreciation Expense = (Cost - Residual Value) x (Units Produced / Estimated Total Units)

Using the information given in the problem, we can calculate the depreciation expense for the current period:

Depreciation Expense = ($400,000 - $20,000) x (400,000 / 2,000,000) = $76,000

Therefore, the correct answer is choice C.

The Widget Tool and Die Company Buys a $400,000 Stamping