Question

A company has the following information available about an equipment:

Cost | $ 350,000 |

Estimated residual Value | $ 10,000 |

Estimated useful life | 10 years |

Total estimated output | 65,000 hours |

Actual hours used year during the first year of operation | 5,500 hours |

What is the depreciation expense for the first year under the units-of-output method?

Select one:

a. $28,769

b. $34,000

c. $68,000

d. $38,000

Answer #1

Ans. |
Option 1st $28,769 |
|||

*Explanations and Calculations: | ||||

First of all, we will calculate the depreciation per unit. | ||||

Depreciation per unit = (Cost - Residual value) / Estimated output | ||||

($350,000 - $10,000) / 65,000 | ||||

$340,000 / 65,000 | ||||

$5.2308 | per unit | |||

Now the depreciation expense will be calculated by the following way : | ||||

Depreciation expense = Actual hours used * Depreciation per unit | ||||

5,500 * $5.2308 | ||||

$28,769 |
(rounded) |
|||

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