A company paid $500,000 to purchase equipment and $15,000 to have the equipment

Question

A company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The estimated residual value of the equipment is $5,000. The company began using the equipment on May 1, 2016. The company has an October 31, 2016 year-end. It used the equipment for a total of 11,200 hours between May 1 and October 31, 2016. Using the units-of- production method, what amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2016?A. $102,000 B.$198,000 C.$204,000 D.$206,000

Explanation / Answer

Equioment cost =500,000+15,000=515,000.

Total hours=28,000 hours.

Using the units-of- production method

Depreciation=Cost-Salvage value/Total hours*hours worked=515,000-5000/28,000*11,200=$204,000.

Depreciation on units of production method not considered period.

amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31=$204,000.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.