A new machine costing $1,800,000 cash and estimated to have a $60,000 salvage value was purchased on January 1. The machine is expected to produce 600,000 units of product during its 8-year useful life. Calculate the depreciation expense in the first year under the following independent situations:1. The company uses the units-of-production method and the machine produces 70,000 units of product during its first year.2. The company uses the double-declining-balance method.3. The company uses the straight-line method.
What will be an ideal response?
1. ($1,800,000 - $60,000)/600,000 units = $2.90/unit; 70,000 units * $2.90/unit = $203,000
2. $1,800,000 * 25% = $450,000
3. ($1,800,000 - $60,000)/8 years = $217,500
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