Thunderbird Manufacturing purchases a new stamping machine for $50,000. Its useful life is estimated to be 250,000 units with a salvage value of $5,000. Prepare a units-of-production (UOP) depreciation schedule based on the given annual usage (units produced) as shown below. Thunderbird ManufacturingUnits-of-Production Depreciation ScheduleStamping Machine End of Year Depreciation per Unit ($) Units Produced Annual Depreciation ($) Accumulated Depreciation ($) Book value ($) $50,000 (new) 1 $ 50,000 $
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.
Thunderbird ManufacturingUnits-of-Production Depreciation ScheduleStamping Machine
| End of Year | Depreciation per Unit ($) | Units Produced | Annual Depreciation ($) | Book value ($) | |
|---|---|---|---|---|---|
| $50,000 (new) | |||||
| 1 | $ | 50,000 | $ | $ | $ |
| 2 | $ | 70,000 | $ | $ | $ |
| 3 | $ | 45,000 | $ | $ | $ |
| 4 | $ | 66,000 | $ | $ | $ |
| 5 | $ | 30,000 | $ | $ | $ |
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