Question

On January​ 4, 2019,​ Margaret's Cafe acquired equipment for . The estimated life of the equipment is 4 years or​ 42,500 hours. The estimated residual value is . What is the depreciation for​ 2019, if​ Margaret's Cafe uses the asset hours and uses the unitsofproduction method of​ depreciation?

Answer 1

Answer: $42300

Explanation:

Here is the complete question:

On January​ 4, 2019,​ Margaret's Cafe acquired equipment for

$147,500. The estimated life of the equipment is 4 years or​ 42,500 hours. The estimated residual value is $20,000. What is the depreciation for​ 2019, if​ Margaret's Cafe uses the asset 14,100 hours and uses the units−of−production method of​ depreciation?

Depreciation has to do with the reduction in the value of an asset due to the fact that such asset is being used.

The depreciation for this question will be calculated as:

= [(Cost of Equipment - Residual Value) / Estimated life of equipment] × Actual Hours used

= [(147,500 - 20,000)/42,500] × 14,100 hours

= [127,500/42,500] × 14,100

= 3 × 14100

= $42,300