Question

a machine with a cost of $180,000 has an estimated residual value of $20,000 and an estimated life of 4 years or 20,000 hours. it is to be depreciated by the units-of-activity method. what is the amount of depreciation for the second full year, during which the machine was used 6,400 hours? a.$64,000 b.$31,200 c.$51,200 d.$6,400

Answer 1

The depreciation expense for the second full year, during which the machine was used 6,400 hours is c.$51,200.

What is the depreciation expense?

Depreciation expense is an accounting method for recognizing the cost of an asset over its useful life.

Depreciation expense is based on some depreciation methods, including the straight-line, the double-declining balance, the sum of the years' digits, or the units-of-activity methods.

With the units-of-activity method, depreciation expense accounts for the units of activity or usage for the period by multiplying the unit rate by the usage hours or units.

Cost of machine = $180,000

Estimated residual value = $20,000

Depreciable amount = $160,000 ($180,000 - $20,000)

The estimated useful life of 4 years = 20,000 hours

Depreciation expense per hour = $8 ($160,000/20,000)

Depreciation method = Units-of-activity method

Second year depreciation expense = $51,200 (6,400 x $8)

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