Question

Multiple Choice Question 94A factory machine was purchased for $387000 on January 1, 2021. It was estimated that it would have a $72000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 36000 hours in the 5 years. The company ran the machine for 3600 actual hours in 2021. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2021 would be

Answer 1

Answer:

the depreciation expense for the year 2021 under the units of activity method is $31,500

Explanation:

The computation of the depreciation expense for the year 2021 under the units of activity method is as follows

= (Cost - residual value) × actual hours in 2021 ÷ total actual hours run

= ($387,000 - $72,000) × 3,600 hours ÷ 36,000 hours

= $31,500

hence, the depreciation expense for the year 2021 under the units of activity method is $31,500