All right. So here we are with the units of production method
uh same information from before same first paragraph
this one is adding a second paragraph which is necessary for the units of
production and this is papa company expects to make
500 000 copies in the first five years of usage
the copier actually made eighty thousand uh one hundred twenty five thousand
one hundred thousand one hundred fifteen thousand and uh ninety thousand
in the first in the years one, two, three, four, and five respectively,
that's necessary for units production because you need to know what they
anticipate and then what they actually did
with the units. So again as you can tell the journal entry for the first one the
tack is still the same equipment copy machine 16 000
cash 16 000 go through the year of a year's operational
entries then we make it to the 1231 adjustment
or we have to do our depreciation. Now this one's unit production remember this
is the medium I guess you would say difficulty level
it has two steps that you do in order to calculate it. Step one is we
need to find that rate and so the equation for that would be
tac minus salvage value all over the total number of units
expected to be produced what we think we're going to at the beginning of its
life and that's going to give us the
depreciation rate per unit. So our tac is sixteen thousand
salvage value is four thousand again that's our also our
depreciable base so our depreciable base is twelve thousand that's what we need
to hit by the end and the total number of units expected
to be produced is 500 000 because it says that's that's what they expect they
estimate they think they're gonna have so we'll
replace that with 500 000 copies and that will give us a depreciation
rate of .024 cents per copy. So almost two and a half
cent per copy is how we're going to depreciate it. Now
you can put an asterisk beside that number if you want to you can you know
highlight that number because once you calculate that number
you're done with it you know you're going to use that
each year from here on out, so step one is kind of a one and done kind of thing,
step two is that we're going to take that depreciation rate that we just
found and multiply it by the actual number of
units that were produced for that year so we're going to do this
on a yearly basis and this will give us our depreciation
expense for that year. All right. So let's start with obviously year one because
that's what we're at and if we look at it it says that our
year one we made actually we made 80 000 copies
so we'll take our depreciation rate which is .024
multiply that by 80 000 copies and that will give us a depreciation
for this year of 1920. So again I'm going to make that table
again, year one depreciation expense is going to be one
thousand nine twenty accumulated depreciation is gonna be one thousand
nine twenty and then my journal entry for the
adjustment is going to be twelve thirty one,
depreciation expense of 1920 and accumulated depreciation of 1920,
that takes care of your one. Now let's go to year two
year two we're going to do the same thing we're going to take the
depreciation rate which is .024 multiplied by how many actual copies we
produced which for year two is going to be one thousand
or excuse me 125 000 multiply that out that's going to give us a depreciation
for this year of three thousand so I'm going to add that to my table.
Year two three thousand and then add the three thousand to what was already there
and accumulate depreciation which is going to give me
49.20 put that into mind journal entry 1231 depreciation expense
of 3000 and accumulated depreciation of 12 000.
excuse me of 3 000. Okay. Let's go to year three same thing same
depreciation rate almost two and a half percent per copy
times a hundred thousand copies it's gonna give me twenty four hundred
so I'm gonna put that in my table. Year three twenty four hundred
accumulated depreciation is gonna I'm gonna add it to the existing
uh forty nine twenty that's going to give me seventy three
my journal entry is going to be the same but this time it's going to be 2400
for the debit and the credit. All right. Let's go to year four
same rate this time we're going to multiply it by 115
000 that is going to give us a depreciation expense of 27.60,
so again year four 27.60 add the 2760 to the 7320 that's already in accumulated
depreciation that's going to give me 10,080
and then the journal entry the adjusting journal entry is going to be the same
except this time it's going to be 2760 and 2760 for the debits and credits
we're still expensing it through depreciation expense and then adding it
to accumulated depreciation. All right. Year five same thing
20 uh 0.024 per copy times the 90 000 copies that will give
me 12 excuse me uh 2160
add that to my table 2160 add that to our with the existing 1080 that's going
to give me 12 000 240. Now stop,
because we're not going to do the journal entry right now because there's
something wrong we cannot have twelve thousand two forty
remember because of our depreciable base our
depreciable base is twelve thousand so in the back of
your mind you have to kind of have that there to say, hey
I can't go over that and if I were to do twelve thousanD
240 I'm over that number so what do I need to do I need to bring that 12240
down to 12 000 because that's the max so in order
to do that I need to take away 240. If I take away 240 from accumulated
depreciation then I have to take away 240 from the
depreciation expense that's the only way to get there, so that will give me 12,000
and therefore my depreciation expense will be
1920. that will give me my maximum depreciable base as my accumulated
depreciation the only way to do that is to hit 1920
in year five as my depreciation expense, so that's
what I'm going to expense that's what I'm going to put in
my journal entry. So depreciation expense 1920 and accumulated depreciation of
1920. if I were to go past 1920 then I would
go past the 12 000 accumulated depreciation which I can't
do. So in the later years be mindful and that's
another reason why I like that table is because it gives me the visual to say,
hey I've gone past that depreciable base and
I can't do that so I need to you know pull it back a little bit um
and then to the point where I can I can hit that
depreciable base, so again it's it's just an easy kind of
thing to to keep up with that way you don't have to to make the mistakes of
depreciating too much. So hopefully that made sense
again this is the medium one, the next one we're going to do is the
hard version which is the declining balance method
but again if you have any questions please leave the comments below y'all
have a good one.