Equipment with a cost of $240,000 has an estimated salvage value of $15,000 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

The units-of-activity method calculates depreciation based on usage. The depreciation per hour is ($240,000 - $15,000) / 15,000 hours = $15 per hour. For 3,300 hours, the depreciation is 3,300 hours * $15/hour = $49,500.

Equipment with a Cost of $240,000 Has an Estimated Salvage