Bigbie Company purchased a depreciable asset for $600,000.The estimated salvage value is $30,000, and the estimated useful life is 10,000 hours.Bigbie used the asset for 1,100 hours in the current year.The activity method will be used for depreciation.What is the depreciation expense on this asset?

Question

Quizplus · Accepted Answer

To calculate the depreciation expense using the activity method, we need to first calculate the depreciation per hour:

Depreciation per hour = (Cost - Salvage value) / Estimated total hours

Depreciation per hour = ($600,000 - $30,000) / 10,000 = $57

Then, we can calculate the depreciation expense for the current year:

Depreciation expense = Depreciation per hour x Hours used in current year
Depreciation expense = $57 x 1,100 = $62,700

Therefore, the depreciation expense on this asset is $62,700, which is option B.

Bigbie Company Purchased a Depreciable Asset for $600,000