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 amortization expense for this period is:
A)$80,000.
B)$400,000.
C)$76,000.
D)$380,000.

Question

Quizplus · Accepted Answer

The formula for calculating amortization expense using the units-of-production method is:

Amortization expense = (cost - residual value) x (units produced in current period / total estimated units of production)

Plugging in the given values, we get:

Amortization expense = ($400,000 - $20,000) x (400,000 / 2,000,000) = $76,000

Therefore, the answer is C, $76,000.

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