Essay: Units of Production Method

Essay: Units of Production Method
June 8, 2011 Comments Off on Essay: Units of Production Method Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

Depletion per ton = (Cost – Salvage Value) / life in tons

Depletion per ton = (4,900,000 – 500,000) / 20,000,000

Depletion per ton = $0.22 per ton

Tons mined = 3,000,000

Depletion expense = 0.22 X 3,000,000 = $660,000

December, 31              Depletion Expense                                          $660,000

Allowance for Depletion                                $660,000

(To record depletion for the year)

2.

Straight line depreciation = (Cost – Salvage Value) / life

Depreciation expense = (152,000 – 22,000) / 5

Depreciation expense = 26,000

Rate = Depreciation expense / depreciable cost

Rate = 26,000 / 130,000

Rate = 20%

The rate for double declining method will be 40%.

Depreciation expense = Book Value X rate

Depreciation expense year 1 = 152,000 X 40% = $60,800

Depreciation expense year 2 = 91,200 X 40% = $36,480

Depreciation expense year 3 = 54,720 X 40% = $21,888

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