Question

Units-of-Output DepreciationA tractor acquired at a cost of $420,000 has an estimated residual value of $30,000, has an estimated useful life of 25,000 hours, and was operated 1,850 hours during the year. Determine the following. If required, round your answer for the depreciation rate to two decimal places.(a) The depreciable cost $ (b) The depreciation rate $ per hour(c) The units-of-output depreciation for the year $

Answer 1

Answer:

a. $390,000

b. $15.6

c. $28,860

Explanation:

depreciable cost = cost of asset - salvage value = $420,000 - $30,000 = $390,000

(b) The depreciation rate $ per hour = depreciable cost / estimated useful life =  $390,000 / 25,000 = $15.6

The units-of-output depreciation for the year = $15.6 x 1,850 hours = $28,860