On January 1, 2012, Bushong Company purchased equipment at a cost of $12,600. The equipment had an estimated useful life of 6 years or 30,000 hours. The equipment will have a $1,200 salvage value at the end of its life. The equipment was used 6,500 hours in 2012. The depreciation expense for the year ending December 31, 2012, using the units-of-production method would be

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on actual usage. The depreciable cost is $12,600 - $1,200 = $11,400. The rate per hour is $11,400 / 30,000 hours = $0.38 per hour. For 6,500 hours, the depreciation expense is 6,500 * $0.38 = $2,470.

On January 1, 2012, Bushong Company Purchased Equipment at a Cost