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

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Accounting

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

Answer & Explanation Solved by verified expert
4.3 Ratings (646 Votes)

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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Transcribed Image Text

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

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