Question

On January 1, the Matthews Band pays $67,600 for sound equipment. The band estimates it will use this equipment for four years and perform 200 concerts. It estimates that after four years it can sell the equipment for $1,000. During the first year, the band performs 45 concerts. Compute the first-year depreciation using the units-of-production method.

Answer 1

Answer: $14,985

Explanation:

Using the Units-of-Production method means that the asset is depreciated based on how many times it is used.

The formula is;

= ( Cost - Salvage Value)/Total Usage

= (67,600 - 1,000) / 200

= $333 per concert

Equipment depreciates by $333 per concert.

First year has 45 concerts;

= 333 * 45

= $14,985