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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense for 2019 if the units-of-production method were used ( Note: Round your answer to the nearest dollar)?

a. $179,400

b. $184,000

c. $218,400

d. $224,000

To determine

Depreciation:

The depreciation is the expense which is debited to the income statement in the ratio of the period of the respective asset.

Accumulated Depreciation:

The accumulated depreciation is the account which is created to record the depreciation expense from the asset purchase time till the disposal time.

To select:

The correct expense as depreciation for 2019 by using units of production method.

Explanation

The Cox Inc. acquired a machine with the following information:

Purchase Cost=$8,00,000Residual Value=$20,000Life of Asset=5 years

The formula for the units of production method is as follows:

Depreciation Expense=(( CostSalvage value)×Activity performed during the periodTotal estimated life time activity of the equipment)

The depreciation expense per year is as follows:

Depreciation Expense=( ( CostSalvage value )×Activity 

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