Equipment with a cost of $400000 has an estimated salvage value of $25000 and an estimated life of 4 years or 15000 hours. It is to be depreciated using the units-of-activity method. What is the amount of depreciation for the first full year during which the equipment was used 3300 hours?
A) $100000
B) $113800
C) $82500
D) $93750

Question

Quizplus · Accepted Answer

Step 1: Calculate Depreciation Rate per Hour
Depreciation Rate = (Cost - Salvage Value) / Total Estimated Hours of Use
Depreciation Rate = ($400,000 - $25,000) / 15,000 hours
Depreciation Rate = $375,000 / 15,000 hours
Depreciation Rate = $25 per hour

Step 2: Calculate Depreciation Expense for 3300 Hours
Depreciation Expense = Depreciation Rate per Hour x Number of Hours Used
Depreciation Expense = $25 x 3300
Depreciation Expense = $82,500

Therefore, the amount of depreciation for the first full year during which the equipment was used 3300 hours is $82,500. Hence, the best choice is C.

Equipment with a Cost of $400000 Has an Estimated Salvage