A company purchased a machine for $970,000.The machine has a useful life of 12 years and a residual value of $4,500.It is estimated that the machine could produce 1,000,000 units over its useful life.In the first year,200,000 units were produced.In the second year,production increased to 300,000 units.Using the units-of-production method,what is the book value of this asset at the end of the second year of operations?
A)$482,750
B)$487,250
C)$485,000
D)$291,000
E)$289,650

Question

Quizplus · Accepted Answer

The units-of-production depreciation expense for the first year is (($970,000 - $4,500) / 1,000,000) * 200,000 = $193,100. For the second year, it is (($970,000 - $4,500) / 1,000,000) * 300,000 = $289,650. The total depreciation over two years is $193,100 + $289,650 = $482,750. The book value at the end of the second year is $970,000 - $482,750 = $487,250.

A Company Purchased a Machine for $970,000