Carson Company purchased a depreciable asset for $280,000. The estimated salvage value is $14,000, and the estimated useful life is 10,000 hours. Carson used the asset for 1,500 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

First, we must calculate the depreciation rate per hour:
Depreciable cost = $280,000 - $14,000 = $266,000
Depreciation rate per hour = Depreciable cost / Estimated total hours of life = $266,000 / 10,000 = $26.60

Next, we can calculate the depreciation expense for the current year:
Depreciation expense = Depreciation rate per hour x Actual hours used = $26.60 x 1,500 = $39,900

Therefore, the correct answer is B, $39,900.

Carson Company Purchased a Depreciable Asset for $280,000