Question

The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-output method during a period when the asset was used for 4,500 hours.
True / False.

Answer 1

Answer:

The correct answer is False.

Explanation:

According to the scenario, the computation of the given data are as follows:

First we calculate the depreciation cost per hour, then

Depreciation cost per hour = ($95,000 - $5,000) ÷ 20,000 hours

= $4.50 per operating hour

So, Depreciation cost for 4,500 hours can be calculated as follows:

Depreciation cost for 4,500 hours = $4.50 × 4,500

= $20,250