On January 2, 2010, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. If KJ Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2011-assuming that during this period, the asset was used 8,250 hours?

Question

Quizplus · Accepted Answer

The units of production method calculates depreciation based on actual usage. The depreciation per hour is ($260,000 - $20,000) / 40,000 hours = $6 per hour. For 8,250 hours, the depreciation expense is 8,250 hours * $6/hour = $49,500.

On January 2, 2010, KJ Corporation Acquired Equipment for $260,000