Norwood, Inc.

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018.

-Refer to the information for Norwood,Inc.
If Norwood uses the units-of-production method,what is the depreciation rate per hour for the equipment?

Question

Norwood, Inc.

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018.

-Refer to the information for Norwood,Inc.  
If Norwood uses the units-of-production method,what is the depreciation rate per hour for the equipment?

Quizplus · Accepted Answer

The depreciation rate per hour is calculated by subtracting the residual value from the cost and then dividing by the total estimated hours of operation: ($80,000 - $5,000) / 12,500 hours = $6.00 per hour.

Norwood, Inc. Norwood, Inc. Purchased a Crane at a Cost of $80,000