Kinder Company purchased a depreciable asset for $200,000.The estimated residual value is $10,000, and the estimated useful life is 10,000 hours.Kinder 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

Depreciation expense using the activity method is calculated as follows:

Depreciable cost = Purchase price - Residual value
Depreciable cost = $200,000 - $10,000 = $190,000

Depreciation per hour = Depreciable cost / Estimated hours of use
Depreciation per hour = $190,000 / 10,000 = $19

Depreciation expense = Depreciation per hour x Hours of use in current year
Depreciation expense = $19 x 1,100 = $20,900

Therefore, the correct answer is B.

Kinder Company Purchased a Depreciable Asset for $200,000