Engels Company purchased a depreciable asset for $600,000.The estimated residual value is $30,000, and the estimated useful life is 10,000 hours.Engels 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

The first step is calculate the depreciable cost:

Depreciable cost = cost - residual value 
Depreciable cost = $600,000 - $30,000 
Depreciable cost = $570,000

Then, we need to calculate the depreciation rate:

Depreciation rate = Depreciable cost / estimated useful life 
Depreciation rate = $570,000 / 10,000 hours 
Depreciation rate = $57 per hour

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

Depreciation expense = Depreciation rate x hours used in the current year 
Depreciation expense = $57 x 1,100 hours 
Depreciation expense = $62,700

Therefore, the correct answer is B.

Engels Company Purchased a Depreciable Asset for $600,000