Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. Determine the machines' first year depreciation under the units-of-production method.
A) $27,000.
B) $54,000.
C) $24,000.
D) $25,800.
E) $48,000.
D) $25,800.
Explanation: Depreciation Expense = [(Cost - Salvage Value)/Estimated Useful Life (in units)]
* Production of Units
Depreciation Expense = [($135,000 - $15,000)/300,000] * 64,500 = $25,800
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