**Depreciation Calculation Example**Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer’s purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced?**Input Field:**- **Depreciation expense**: [Input box for answer] This example aims to calculate the depreciation expense for Shearer’s Foods based on unit production. To solve this, you would use the units-of-production depreciation method, which calculates depreciation based on actual usage.**Components for calculation:**- **Initial Cost**: $104,500- **Residual Value**: $36,000- **Total Expected Production**: 685,000 units- **Units Produced in Year 1**: 65,000 units### Steps to Calculate:1. **Calculate Depreciable Amount**: \[ \text{Depreciable Amount} = \text{Initial Cost} - \text{Residual Value} = 104,500 - 36,000 = 68,500 \]2. **Calculate Depreciation per Unit**: \[ \text{Depreciation per Unit} = \frac{\text{Depreciable Amount}}{\text{Total Expected Production}} = \frac{68,500}{685,000} = 0.10 \text{ per unit} \]3. **Calculate Depreciation Expense for Year 1**: \[ \text{Depreciation Expense} = \text{Depreciation per Unit} \times \text{Units Produced in Year 1} = 0.10 \times 65,000 = 6,500 \]Therefore, the depreciation expense for year 1 is $6,500.

Depreciation expense refers to the reduction in the value of an asset over a period of time due to wear and tear or obsolescence. It is a systematic reduction manner which continues until the value of the asset becomes zero or negligible.Computing the depreciation expense as follows: Depreciation rate =Cost value - Residual Value Life expectancy= $104,500 - $36,000685,000 units = $0.1 Depreciation expense for year 1 = $0.1 ×65,000 units = $6,500. Answer: The depreciation expense is $ 6,500.

Business

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Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer's purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced? Depreciation expense

Shearer's Foods, part of the $374 billion global snack food industry, employs 3,300 people in Brewster, Ohio. If Shearer's purchased a packaging unit for $104,500 with a life expectancy of 685,000 units and a residual value of $36,000, what is the depreciation expense for year 1 if 65,000 units were produced? Depreciation expense

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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