Emery Corp paid $650,000 to purchase equipment and $10,000 to have the equipment

Question

Emery Corp paid $650,000 to purchase equipment and $10,000 to have the equipment delivered to and installed in Emery Corp's production facilities. Commercial use of the equipment began on May 1, 2013. The estimated residual value of the equipment is $5,000. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of 10 years. Emery Corp's fiscal year ended on October 31, 2013, and they had used the equipment a total of 1,400 hours prior to the year-end. Using the units- of- production method, what amount of depreciation expense (to the nearest thousand) would Emery Corp report for this equipment in the income statement prepared for the year-ended October 31, 2013?

$26,750

$32,750

$33,000

$16,375

Explanation / Answer

Calculate depreciation expense recorded on oct 31,2013

Depreciation Expenses = (660000-5000)/28000*1400 = 32750

So answer is b) 32750

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