Lennon Company purchased a depreciable asset for $200,000.The estimated salvage value is $10,000, and the estimated useful life is 10,000 hours.Lennon used the asset for 1,100 hours in the current year.The activity method will be used for depreciation.What is the depreciation expense on this asset?

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation per hour: 
Depreciation per hour = (cost - salvage value) / estimated total hours 
Depreciation per hour = ($200,000 - $10,000) / 10,000 = $19

Then, we can calculate the depreciation expense for the current year: 
Depreciation expense = depreciation per hour x hours used in the current year 
Depreciation expense = $19 x 1,100 = $20,900

Therefore, the correct choice is B.

Lennon Company Purchased a Depreciable Asset for $200,000