E7-43 (Learning Objective 2: Computing units-of-production depreciation) Buff Gy

Question

E7-43 (Learning Objective 2: Computing units-of-production depreciation) Buff Gym purchased exercise equipment at a cost of $107,000. In adition, Bulf paid $3,000 for a special platform on which to stabilize the equipment for use. Freight costs of $1,600 to ship the equipment were borne by the seller. Buff will depreciate the equipment by the units-of- production method, based on an expected useful life of 55,000 hours of exercise. The estimated residual value of the equipment is $11,000. How many hours did Buff Gym use the machine if depreciation expense is $4,320?

Explanation / Answer

Cost of equipment = 107000+3000 = $110000 Depreciable cost = 110000-11000 = 99000 Hours used = 4320/(99000/55000)= 2400

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