Question

Use units-of-activity depreciation to calculate the annual depreciation for equipment that cost 20,000 with a residual value 5,000 and is expected to run for 15,000 hours. The machine ran 6,000 hours this year:____________

Answer 1

Answer: $6,000

Explanation:

Depreciation rate = (Cost - Residual value) / Expected useful life run

= (20,000 - 5,000) / 15,000

= $1 per hour

Machine ran for 6,000 hours so depreciation is;

= 6,000 * 1

= $6,000