Question

On June 1, 2021, Duncan Inc. purchased equipment for $74,000. The equipment had an estimated life...

On June 1, 2021, Duncan Inc. purchased equipment for
$74,000. The equipment had an estimated life of ten
years, an estimated residual value of $8,000, and was
expected to be used to produce 150,000 units over its
life. During 2021, the equipment was used to produce
11,000 units and during 2022 it was used to produce
19,000 units.

Assume the company employs the units of production
method of depreciation.

Calculate the amount of accumulated depreciation on
the equipment shown in the company's December 31, 2022
balance sheet.
Business   Accounting   
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Homework Answers

Answer #1

Cost of equipment = $74,000

Residual value = $8,000

Estimated life = 150,000 units

Depreciation per unit = (Cost of equipment - Residual value )/Estimated life

= (74,000 - 8,000)/150,000

= $0.44

Production in 2021 = 11,000 units

Production in 2022 = 19,000 units

Depreciation expense for year 2021 = Production in 2021 x Depreciation per unit

= 11,000 x 0.44

= $4,840

Depreciation expense for year 2022 = Production in 2022 x Depreciation per unit

= 19,000 x 0.44

= $8,360

Accumulated depreciation on Dec 31, 2022 = Depreciation expense for year 2021 + Depreciation expense for year 2022

= 4,840 + 8,360

= $13,200

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