Mohr Company purchases a machine at the beginning of the year at a cost of $34,000. The machine is depreciated using the units-of-production method. The company estimates it will use the machine for 5 years, during which time it anticipates producing 52,000 units. The machine is estimated to have a $8,000 salvage value. The company produces 9,800 units in year 1 and 6,800 units in year 2. Depreciation expense in year 2 is:
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Mohr Company purchases a machine at the beginning of the year at a cost of $34,000. The machine is
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