Question

Equipment with a cost of $150,000 has an estimated salvage value of $10,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours?

		$37,500.
		$35,000.
		$37,800.
		$36,250.

Answer 1

• Working

A	Cost	$          150,000.00
B	Residual Value	$            10,000.00
C=A - B	Depreciable base	$          140,000.00
D	Usage	10,000 hour
E = C/D	Depreciation per …..	$                  14.00 per hour

• Answer calculation

Depreciation expense = 2700 hours x $ 14
= $ 37,800

• Correct Answer = Option #3: $ 37,800