On January 10, 2010, 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, 2011, if Baldwin Corporation uses the asset 5,500 hours in 2010 and 4,500 hours in 2011?

Question

Quizplus · Accepted Answer

The units of production method is used here. Depreciation per hour = ($124,000 - $10,000) / 24,000 hours = $4.75/hour. For 2010: 5,500 hours x $4.75 = $26,125. For 2011: 4,500 hours x $4.75 = $21,375. Total accumulated depreciation by December 31, 2011 = $26,125 + $21,375 = $47,500.

On January 10, 2010, Maxim Corporation Acquired Equipment for $124,000