The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-output method during a period when the asset was used for 4,500 hours.

Question

Quizplus · Accepted Answer

Depreciation per Operating Hour = (Cost - Residual Value) / Total Units of Output = $95,000 - $5,000 / 20,000 hours
Depreciation Expense = Depreciation per Operating Hour × Total Units of Output Used = $4.5 × 4,500 hours = $20,250

The Amount of Depreciation Expense for a Fixed Asset Costing