On January 2, 2011, KJ Corporation acquired equipment for $260,000. The estimated life of the equipment is 5 years or 40,000 hours. The estimated residual value is $20,000. If KJ Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2012, assuming that during this period, the asset was used 8,250 hours?

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation rate per hour of usage:

Depreciation rate per hour = (Acquisition cost - Residual value) / Estimated total hours of usage
Depreciation rate per hour = ($260,000 - $20,000) / 40,000 = $6 per hour

Next, we can calculate the depreciation expense for the year ended December 31, 2012:

Depreciation expense = Depreciation rate per hour x Actual hours of usage during the year
Depreciation expense = $6 x 8,250 = $49,500

Therefore, the answer is B.

On January 2, 2011, KJ Corporation Acquired Equipment for $260,000