Equipment that cost of $180,000 has an estimated residual value of $15,000 and an estimated useful life of 4 years or 25,000 hours. Using the units-of-production method, the depreciation expense for the first year, during which the machine was used 3,300 hours, would be
A) $45,000.
B) $41,500.
C) $23,760.
D) $21,780.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on usage. The depreciation per hour is ($180,000 - $15,000) / 25,000 hours = $6.60 per hour. For 3,300 hours, the depreciation expense is 3,300 hours * $6.60/hour = $21,780.

Equipment That Cost of $180,000 Has an Estimated Residual Value