On January 2, 2017, Konrad Corporation acquired equipment for $760,000. The estimated life of the equipment is 5 years or 37,000 hours. The estimated residual value is $20,000. If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2018, assuming that during this period, the asset was used 5000 hours?

Question

Quizplus · Accepted Answer

The units of production method calculates depreciation based on actual usage. The depreciation per hour is ($760,000 - $20,000) / 37,000 hours = $20 per hour. For 5,000 hours, the depreciation expense is 5,000 hours * $20/hour = $100,000.

On January 2, 2017, Konrad Corporation Acquired Equipment for $760,000