Deland Company purchased equipment on March 1, 2009, for $130,000. The residual value is $40,000 and the estimated life is 10 years or 60,000 hours. Compute depreciation expense for the year ending December 31, 2009, if the company uses the units- of- production method of depreciation and uses the equipment for 9,000 hours.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on actual usage. The depreciation per hour is ($130,000 - $40,000) / 60,000 hours = $1.50 per hour. For 9,000 hours, the depreciation expense is 9,000 hours * $1.50/hour = $13,500.

Deland Company Purchased Equipment on March 1, 2009, for $130,000