Question

Machine costing $480,000 has an estimated salvage value of $40,000 and (lifetime output is estimated at 110,000 units; a firm produced 12,000 units in year one and 18,000 in year two). The depreciation expense for the second year using the units of (activity) method is----.

Select one:

a. $73,000.

b. $72,000.

c. $75,000.

d. $74,000.

The current maturities on long term debt is----

Select one:

a. long term asset.

b. current liability.

c. long term liability.

d. Current asset.

Answer 1

(1) Depreciation expense for year 2 = Depreciation per unit * Units produced in year 2

Depreciation per unit = (Costing - Salvage)/Estimated output for lifetime

= ($480000 - $40000)/110000 units = $4

Depreciation expense for year 2 = $4 * 18000 units = $72000

Option (b) is correct

(2) The current maturities on long term debt is Current liability.

Under long term debt, part which having long term maturity is long term debt & part which having current maturity is current liability

Hence option (b) is correct