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Harper Company acquired a $150,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $25,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Harper Company uses units-of-production depreciation, and the company produces 50,000 units in 2019, what is depreciation expense for 2019

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Answer:

$12,500

Explanation:

Given that,

Cost of machine = $150,000

Useful life = 5 years

Residual value = $25,000

Depreciation expense per unit:

= (Cost of machine - Residual value) ÷ Number of units produced

= ($150,000 - $25,000) ÷ 500,000

= $125,000 ÷ 500,000

= $0.25

Depreciation expense for 2019:

= Number of units produces × Depreciation expense per unit

= 50,000 × $0.25

= $12,500

The depreciation expense of the year 2019 is $12,500

Calculation of the depreciation expense:

Since

Cost of machine = $150,000

Useful life = 5 years

Residual value = $25,000

So first we determine the depreciation expense per unit

So,

= (Cost of machine - Residual value) ÷ Number of units produced

= ($150,000 - $25,000) ÷ 500,000

= $125,000 ÷ 500,000

= $0.25

Now the depreciation expense is

= Number of units produces × Depreciation expense per unit

= 50,000 × $0.25

= $12,500

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