Question

Required information [The following information applies to the questions displayed below.] On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and has a residual value of $6,000. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 25,000 and 84,000 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.)

Answer 1

Units of Usage Method
A	Cost	$     36,000.00
B	Residual Value	$        6,000.00
C=A - B	Depreciable base	$     30,000.00
D	Usage in units(in Units)	500000
E=D/C	Depreciation per Unit	$                0.06

Year	Book Value	Units Produced	Depreciation expense	Book Value	Accumulated Depreciation
2018	$       36,000.00	25000	$      1,500.00	$   34,500.00	$    1,500.00
2019	$       34,500.00	84000	$      5,040.00	$   29,460.00	$    6,540.00