Question

Coutinho Company depreciates an asset with an original cost of $60,000 using the activity-based method of...

Coutinho Company depreciates an asset with an original cost of $60,000 using the activity-based method of depreciation. The asset was purchased in 2020 and used for 350 hours in the year. The useful life of the asset is estimated to be 5,000 hours and the depreciation expense for 2020 is $3,920. What is the estimated salvage value of the asset?

Multiple Choice

  • $4,600

  • $6,000

  • $5,500

  • $5,000

  • $4,000

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Answer #1

Correct answer------------$4000

Working

Depreciation of 2020 $       3,920.00
Hours used in 2020 350
Depreciation per hour $             11.20

.

Depreciation of 2020 $       3,920.00
Hours used in 2020 350
Depreciation per hour $             11.20
Multiplied by: Life of asset (in hours) $       5,000.00
Depreciable base of asset $    56,000.00
Salvage value (60000-56000) $       4,000.00

.

A Cost $ 60,000
B Residual Value (Balancing figure) $ 4,000
C=A - B Depreciable base $ 56,000
D Usage in units(in Hours) 5,000
E Depreciation per hour $ 11.20
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