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CPA Financial Accounting & Reporting (FAR) · Question of the Day

CPA Financial Accounting & Reporting (FAR) Question of the Day

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Friday, October 30, 2026

A company uses the units-of-production depreciation method. A machine costs $90,000 with a $6,000 salvage value and an estimated productive capacity of 42,000 units. In Year 1, the machine produces 8,400 units. What is Year 1 depreciation?

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Question of the Day

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A company uses the units-of-production depreciation method. A machine costs $90,000 with a $6,000 salvage value and an estimated productive capacity of 42,000 units. In Year 1, the machine produces 8,400 units. What is Year 1 depreciation?

  1. $18,000
  2. $16,800 (correct answer)
  3. $20,000
  4. $15,000

Explanation: Depreciation per unit = ($90,000 - $6,000) / 42,000 = $84,000 / 42,000 = $2.00 per unit. Year 1 depreciation = 8,400 x $2.00 = $16,800. Answer B is correct. Answer A applies $2.14 per unit (ignoring salvage). Answer C uses $90,000 / 42,000 x 8,400. Answer D uses an incorrect rate.