To determine the machine's second-year depreciation expense using the units-of-production method, we proceed as follows:

Step-by-Step Solution

1. Calculate Depreciable Base:

   • The initial cost of the machine is $86,800.
   • Salvage value (residual value) is $6,000.
   • Depreciable base = Cost - Salvage value = $86,800 - $6,000 = $80,800.

2. Calculate Depreciation Expense per Unit:

   • Total units of production expected over the machine’s useful life = 404,000 units.
   • Depreciation expense per unit = Depreciable base / Total units of production.
   • $\text{Depreciation expense per unit} = \frac{80,800}{404,000} = 2.00$ dollars per unit.

3. Calculate Depreciation Expense for the Second Year:

   • The machine produced 34,400 units in the second year.
   • Depreciation expense for the second year = Depreciation expense per unit * Units produced in Year 2.
   • $\text{Depreciation Expense} = 2.00 \times 34,400 = 68,800$ dollars.

Answer

The machine’s second-year depreciation expense using the units-of-production method is $68,800.

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Related Questions for Further Understanding

1. How would the depreciation change if the machine produced fewer units in the second year?
2. What is the impact of salvage value on the units-of-production depreciation method?
3. How does the units-of-production method differ from straight-line depreciation?
4. If the useful life or total units produced estimate changes, how does that affect depreciation?
5. How would we calculate total depreciation over multiple years using this method?

Tip

When using the units-of-production method, always ensure the estimated total units align with actual usage to avoid significant changes in depreciation in future years.