On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $39,300. The drill press is expected to last 10 years and has a residual value of $6,300.

On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $39,300. The drill press is expected to last 10 years and has a residual value of $6,300. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 26,500 and 87,000 units, respectively, were produced. Required: Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the units-of-production method is used. (Round depreciation per unit to 2 decimal places.)

Solutions

Expert Solution

Answer:-Units of production method:-

Annual depreciation expense per unit produced=Cost – salvage /Total units produced

=($39300-$6300)/500000 units =$.07 per unit

Depreciation expense in 2018= Depreciation expense per unit* Units produced in year 2018

=$.07 per unit *26500 units

=$1855

Book value at end of 2018 = $39300 – $1855 = $37445

Depreciation expense in 2019= Depreciation expense per unit* Units produced in year 2019

=$.07 per unit *87000 units

=$6090

Book value at end of 2019 = $37445 – $6090 = $31355

ekkarill92 answered 1 year ago

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