Concept #1: Units-of-Activity Depreciation

Example #1: Units-of-Activity Depreciation

Example #2: Units-of-Activity Depreciation

Practice: ABC Company purchased a new machine on January 1, Year 1 for $44,000. The company expects the machine to produce 50,000 units. The company thinks it could sell the scrap metal from the machine for $4,000 at the end of its useful life. If the company uses the units-of-production method for depreciation, what will be the net book value of the machine on December 31, Year 1, if 15,000 units are produced with the machine during the year?

Practice: DBQ Company purchased a machine on January 1, Year 1 for $60,000. The company estimated a 300,000 unit production useful life and $8,000 residual value. During Year 1, the company produced 90,000 units. During Year 2, the company produced 30,000 units. If the company uses the units-of-production method for depreciation, what will be the amount of accumulated depreciation on December 31, Year 2?

Practice: XYZ Company purchased a machine on January 1, 2018 for $110,000. The company estimated a 20,000 unit useful life and $10,000 residual value. XYZ produced 8,000 units in 2018; 6,000 units in 2019; and 10,000 units in 2020. If the company uses the units-of-production method for depreciation, what will be the amount of depreciation expense for the year 2020?