Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 residual value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the straight-line method.

A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

Question

Adarshdeep Singh · Accepted Answer

Final Answer : B, Explanation :  Under the straight-line method, annual depreciation expense = (Cost of the asset – Residual value) / Useful life in units.In this case, the annual depreciation expense would be:($87,000 - $7,000) / 5 years = $16,000 per yearSince we are calculating the machine's second-year depreciation, we only need to subtract the first-year depreciation from the total depreciation:$16,000 x 2 years = $32,000 total depreciation over 5 years$32,000 / 5 years = $6,400 first-year depreciation$16,000 - $6,400 = $9,600 second-year depreciation.Therefore, the second-year depreciation is $9,600, which is option B.

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