Billu Limited purchased equipment on January 1, 2019 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Additional information: $$\begin{array} {| l | l |}
\hline \text { Year } & \text { Units of Output } \
\hline 2019 & 2,100 \
\hline 2020 & 2,000 \
\hline 2021 & 1,700 \
\hline 022 & 2,300 \
\hline 2023 & 1,900 \
\hline
\end{array}$$ Assuming the company uses the units-of-production depreciation method, calculate the depreciation expense for 2022.

Question

Billu Limited purchased equipment on January 1, 2019 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December 31 year end. Additional information: $$\begin{array} {| l | l |} 
\hline \text { Year } & \text { Units of Output } \
\hline 2019 & 2,100 \
\hline 2020 & 2,000 \
\hline 2021 & 1,700 \
\hline 022 & 2,300 \
\hline 2023 & 1,900 \
\hline
\end{array}$$ Assuming the company uses the units-of-production depreciation method, calculate the depreciation expense for 2022.

Quizplus · Accepted Answer

Depreciation expense = (Cost of equipment - Residual value) / Units of output * Units produced in the year= (275,000 - 25,000) / 10,000 * 2,300= $57,500

Billu Limited Purchased Equipment on January 1, 2019 for $275,000