On 1 January 2013, Zane Manufacturing Company purchased a machine for $40 000. The company expects to use the machine a total of 24 000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4 000. The company used the machine 8 000 hours in 2013 and 12 000 in 2014. What is the depreciation expense for 2013 if the company uses units- of- production depreciation?

Question

Quizplus · Accepted Answer

The units-of-production depreciation method calculates depreciation based on usage. The total depreciable amount is $40,000 - $4,000 = $36,000. The depreciation per hour is $36,000 / 24,000 hours = $1.50 per hour. For 2013, the machine was used for 8,000 hours, so the depreciation expense is 8,000 hours * $1.50/hour = $12,000.

On 1 January 2013, Zane Manufacturing Company Purchased a Machine