A company purchased equipment for $100 000 in 2014. The machine will be used for 10 000 hours and will have a residual value of $20 000. The equipment was used for 2 400 hours in 2014. How much depreciation will be recorded in 2014 if the company elects the units- of- production method?

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on actual usage. The depreciation per hour is ($100,000 - $20,000) / 10,000 hours = $8 per hour. For 2,400 hours, the depreciation is 2,400 hours * $8/hour = $19,200.

A Company Purchased Equipment for $100 000 in 2014