On January 10, 2006, Maxim Corporation acquired equipment for $124,000. The estimated life of the equipment is 3 years or 24,000 hours. The estimated residual value is $10,000. What is the balance of Accumulated Depreciation on December 31, 2007, if Baldwin Corporation uses the asset 5,500 hours in 2006 and 4,500 hours in 2007?

Question

Quizplus · Accepted Answer

The depreciation per hour is calculated as ($124,000 - $10,000) / 24,000 hours = $4.75 per hour. For 2006, depreciation is 5,500 hours * $4.75 = $26,125. For 2007, depreciation is 4,500 hours * $4.75 = $21,375. The accumulated depreciation by December 31, 2007, is $26,125 + $21,375 = $47,500.

On January 10, 2006, Maxim Corporation Acquired Equipment for $124,000