Question

On January 1, 2018 Boyle's Bagels acquired equipment for $110,000. The estimated tite of the equipment is 15 years or 30,000 hours. The estimated residual value is $20,000. What is the amount of depreciation expense for 2018 , if Boyle's uses the asset 2,200 hours and uses the units-of-production method of depreciation?

Select one:
a. $6,600
b. $8,067
c. $5,000
d. $6,000

Answer 1

The depreciation expense for 2018, using the units-of-production method, would be approximately $8,067.

Step-by-step explanation:

The amount of depreciation expense for 2018, using the units-of-production method, can be calculated by first determining the depreciation rate per hour. The depreciation rate is calculated by subtracting the estimated residual value from the cost of the equipment and dividing it by the estimated total hours of use. In this case, the depreciation rate per hour would be ($110,000 - $20,000) / 30,000 = $3.33 per hour.

To calculate the depreciation expense for 2018, we can multiply the depreciation rate per hour by the number of hours the equipment was used in that year. In this case, the equipment was used for 2,200 hours, so the depreciation expense for 2018 would be $3.33 x 2,200 = $7,326. Therefore, option b, $8,067, is the closest approximation to the amount of depreciation expense for 2018.