On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $38,000. A total of $4,200 was paid for installation and testing. During the first year, Milton paid $6,300 for insurance on the equipment and another $710 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $8,400. During Year 1, the equipment produced 12,000 units. What is the amount of depreciation for Year 1? Multiple Choice $4,056 $4,897 $4,812 $5,820
On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $38,000. A total of $4,200 was paid for installation and testing. During the first year, Milton paid $6,300 for insurance on the equipment and another $710 for routine maintenance and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is $8,400. During Year 1, the equipment produced 12,000 units. What is the amount of depreciation for Year 1? Multiple Choice $4,056 $4,897 $4,812 $5,820
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:On January 1, Year 1, Milton Manufacturing Company purchased equipment with a list price of $38,000. A total of $4,200 was paid for
installation and testing. During the first year, Milton paid $6,300 for insurance on the equipment and another $710 for routine maintenance
and repairs. Milton uses the units-of-production method of depreciation. Useful life is estimated at 100,000 units, and estimated salvage
value is $8,400. During Year 1, the equipment produced 12,000 units. What is the amount of depreciation for Year 1?
Multiple Choice
$4,056
$4,897
$4,812
$5,820
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