Equipment with a cost of ¥800,000 has an estimated residual value of ¥50,000 and an estimated life of 4 years or 15,000 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 3,300 hours?

Question

Quizplus · Accepted Answer

To calculate depreciation under the units-of-activity method, we need to follow the below steps:

Step 1: Calculate depreciable cost = Cost of Equipment − Estimated Residual Value = ¥800,000 − ¥50,000 = ¥750,000

Step 2: Determine the amount of cost per unit of activity:
Cost per Unit of Activity =
Depreciable Cost ÷ Estimated Activity
= ¥750,000 ÷ 15,000 hours = ¥50 per hour

Step 3: Calculate depreciation expense for the year:
Depreciation expense = Cost per Unit of Activity × Actual Activity during the year
= ¥50 per hour × 3,300 hours
= ¥165,000

Therefore, the amount of depreciation for the first full year is ¥165,000. Option C is the correct answer.

Equipment with a Cost of ¥800,000 Has an Estimated Residual