Question

On January​ 2, 2019, Konrad Corporation acquired equipment for $ 850 comma 000. The estimated life of the equipment is 5 years or 38 comma 000 hours. The estimated residual value is $ 14 comma 000. If Konrad Corporation uses the units of production method of​ depreciation, what will be the debit to Depreciation Expense for the year ended December​ 31, 2020, assuming that during this​ period, the asset was used 6 comma 000 ​hours?

Answer 1

Answer:

The depreciation expense for the year under units of production method is $ 132,000

Explanation:

Computation of depreciation expense under the units of production method

Total cost of equipment                                                     $ 850,000

Salvage value of equipment                                              $ (   14,000)

Depreciable basis                                                               $ 836,000

Estimated useful life in hours                                                   38,000

Depreciation per hour of usage $ 836,000 / 38,000      $ 22 per hour used

Total usage during the year                                                    6000 hours

Depreciation expense  6000 hours * $ 22 per hour          $ 132,000