On January 2, 2010, Pepper Company acquired equipment to be used in its manufacturing operations.The equipment has an estimated useful life of ten years, an estimated residual value of $22,000, and was estimated to be used 42,000 hours.The depreciation applicable to this equipment was $104,000 for 2012, calculated under the activities method after the machine was used for 5,000 hours.What was the acquisition cost of the equipment?

Question

Quizplus · Accepted Answer

The acquisition cost of the equipment can be calculated as follows:Depreciation for 2012 = (Acquisition cost - Residual value) x (Hours used in 2012 / Total estimated hours)$104,000 = (Acquisition cost - $22,000) x (5,000 / 42,000)Acquisition cost = $872,400

On January 2, 2010, Pepper Company Acquired Equipment to Be