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Units of Activity - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000 salvage value is...

Units of Activity - Commercial Lawn Mower: Acquired January 1. Purchased for $14,000 salvage value is $2,000. Useful life is 5 years, Total units of activity = 6,250 hours.

A. What is the depreciable cost amount?

B. Show your computation to calculate the depreciation rate per hour.

C. Will the depreciation rate change from year to year? Yes or No

D. Complete the following Units of Activity Depreciation table for the first five years they use the equipment:

Year Hours Used Deprecation Rate Per Hour Annual Depreciation Expense Accumulated Depreciation Balance Book Value
Year 1 950
Year 2 845
Year 3 1,250
Year 4 1,555
Year 5 1,650

E. What is the accumulated depreciation balance for the asset at the end of year 3?

F. What must the book value equal at the end of year 5?

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Homework Answers

Answer #1

A. Depreciable cost is the amount of cost the asset can be depreciated over time.

B. Calculation of depreciation rate per hour:

= (cost of asset - Salvage value of asset) / Life of asset in hour

= (14000-2000) / 6250

= $1.92 per hour

C. Yes, depreciation rate year will change from year to year.

D. Depreciation table:

E. Answer: $5846

F. Book value equal at the end of year 5 is zero.

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