Question

A factory machine was purchased for $375000 on january 1, 2018. it was estimated that it would have a $75000 salvage value at the end of its 5-year useful life. it was also estimated that the machine would be run 40000 hours in the 5 years. the company ran the machine for 4000 actual hours in 2018. if the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2018 would be

Answer 1

Given that a factory machine was purchased for $375000 on january 1, 2018. it was estimated that it would have a $75000 salvage value at the end of its 5-year useful life. it was also estimated that the machine would be run 40000 hours in the 5 years. the company ran the machine for 4000 actual hours in 2018.

If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2018 would be

$\frac{375000-75000}{40000} \times4000= \frac{300000}{10} =\ 30,000$