Question
Pemberton Corp. purchased a machine costing $300,000 that had an estimate useful life of six years and residual value of $18,000. The machine is expected to produce 3,525,000 units during its useful life, as follow:
YEAR UNITS
1 930,000
2 800,000
3 580,000
4 500,000
5 415,000
6 300,000
3,525,000
a. What will be each year’s depreciation charge if Pemberton uses the units-of production method?
b. Will this give significantly different depreciation charges in each year than the sum-of-the-years’ digits method?