A construction company purchased a piece of equipment for $1470. The expected life is 8000 hours,...

A construction company purchased a piece of equipment for $1470. The expected life is 8000 hours, after which it will have a salvage value of $310. Find the amount of depreciation for the first year if the piece of equipment was used for 2000 hours. Use the units-of-production method of depreciation.

Expert Solution

Correct Answer:

Depreciation expense for the first year = $ 290

Working:

Units of Production method
A	Cost	$ 1,470
B	Residual Value	$ 310
C=A - B	Depreciable base	$ 1,160
D	Usage in units(hours)	8000
E =C/D	Depreciation per hour used	$ 0.15

	A	B	C = B * Depreciation per hour used	D =A-C
Year	Book Value	Usage (hours)	Depreciation expense	Ending Book Value
1	$ 1,470	2,000	$ 290	$ 1,180

End of answer.

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ekkarill92 answered 2 years ago

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