The calculation for annual depreciation using the units-of-activity method is
A) (Initial Cost/Estimated Output) × Actual Yearly Output
B) (Depreciable Cost/Yearly Output) × Estimated Output
C) Depreciable Cost/Yearly Output
D) (Depreciable Cost/Estimated Output) × Actual Yearly Output

Question

Quizplus · Accepted Answer

The units-of-activity method calculates depreciation based on usage or output rather than time. It involves three variables: the initial cost of the asset, the estimated output of the asset over its useful life, and the actual output achieved in a given year. The depreciable cost is initially calculated by subtracting the salvage value from the initial cost. Then, the annual depreciation expense is calculated by dividing the depreciable cost by the estimated output and multiplying that figure by the actual output achieved in the current year. Therefore, the correct calculation for annual depreciation using the units-of-activity method is (Depreciable Cost/Estimated Output) × Actual Yearly Output, which is option D.

The Calculation for Annual Depreciation Using the Units-Of-Activity Method Is