Sample Essay In this research, it is conclusive that it is built on an amalgamation…
Essay: Units of Production Method
Essay: Units of Production Method
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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