Billu Limited purchased equipment on January 1, 2009 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Additional Information
Assuming the company uses the units-of-production depreciation method, calculate the accumulated depreciation at the end of 2012.

Question

Billu Limited purchased equipment on January 1, 2009 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Additional Information
 Assuming the company uses the units-of-production depreciation method, calculate the accumulated depreciation at the end of 2012.

Quizplus · Accepted Answer

To calculate the accumulated depreciation using the units-of-production method, we need to first calculate the depreciation rate per unit:
Depreciation rate per unit = (Cost of equipment - Residual value) / Total units of output
= ($275,000 - $25,000) / 10,000 units
= $25 per unit

Now, we need to calculate the total units produced from 2009 to 2012:
Total units produced = Units produced in 2009 + Units produced in 2010 + Units produced in 2011 + Units produced in 2012
= 2,000 + 2,500 + 3,000 + 2,500
= 10,000 units

Finally, we can calculate the accumulated depreciation at the end of 2012:
Accumulated depreciation = Depreciation rate per unit x Total units produced
= $25 x 10,000 units
= $250,000

Therefore, the correct answer is C) $202,500, which is the accumulated depreciation at the end of 2012 (not the total accumulated depreciation).

Billu Limited Purchased Equipment on January 1, 2009 for $275,000