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On January 1, 2018, Anvil Corp. purchased equipment for $60,000. It was expected to last 5 years, after which it will be sold for $5,000. It is expected to be used for a total of 10,000 machine hours, and was used for 750 hours during the year ended December 31, 2018.
-The depreciation expense for 2018 using the units-of-production method will be
A) $4,125.
B) $11,000.
C) $4,500.
D) $12,250.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on usage. The formula is: (Cost - Salvage Value) / Total Estimated Units of Production. Here, it's ($60,000 - $5,000) / 10,000 hours = $5.50 per hour. For 750 hours, the depreciation is 750 * $5.50 = $4,125.

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