Question

In 2016, Omar Co. purchased a machine for 480,000 SAR cash. The machine is expected to produce 2,500,000 units during its useful life and has an estimated salvage value of 80,000 SAR.

Assume that:

In 2016, Omar Co. produced 600,000 units

In 2017, 700,000 units were produced.

In 2018, 500,000 units were produced.

In 2019, 300,000 units were produced.

In 2020, the factory was closed for maintenance reasons.

In 2021, 400,000 units were produced.

Calculate the following: (draw a table)

The amount of depreciation expense in those years?

The amount of accumulated depreciation?

The amount of book value in these years?

Answer:

Answer 1

First of all, we need to calculate depreciation expense per unit which is calculated as follows:-

Depreciation per unit = (Cost - Salvage Value)/Useful Life in units

= (480,000 SAR - 80,000 SAR)/2,500,000 units = 0.16 SAR per unit

  Table showing Dep. , Accumulated Dep. and Book Value (Amts in SAR)

Year	Units Produced (A)	Depreciation Exp. (B = A*0.16 per unit)	Accumulated Depreciation (C)	Book Value (480,000 - C)
2016	600,000	96,000	96,000	384,000
2017	700,000	112,000	208,000	272,000
2018	500,000	80,000	288,000	192,000
2019	300,000	48,000	336,000	144,000
2020	0	0	336,000	144,000
2021	400,000	64,000	400,000	80,000