On January 1, 2010, Digger purchased some equipment for $19, 600.The anticipated life of the equipment was five years and residual value was estimated to be $3, 100.The machine was expected to produce 600, 000 units.In January of 2010, 25, 000 units were produced and production was doubled in February.The company uses the activity depreciation method.What is the amount of depreciation expense for the month of February?

Question

Quizplus · Accepted Answer

The depreciation expense is calculated using the activity method: (Cost - Residual Value) / Total Units = Depreciation per Unit. For February: (19,600 - 3,100) / 600,000 = $0.0275 per unit. February production is 50,000 units (double of January's 25,000), so 50,000 * $0.0275 = $1,375.00.

On January 1, 2010, Digger Purchased Some Equipment for $19