Question

A machine with a cost of $65,233 has an estimated residual value of $5,023 and an estimated life of 5 years or 14,713 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 3,119 hours? Do not round your intermediate calculations.

Answer 1

The amount of depreciation for the second full year, during which the machine was used 3,119 hours, is $12,562.38.

Step-by-step explanation:

To calculate the depreciation using the units-of-activity method, we need to determine the depreciation per unit. This can be calculated by subtracting the estimated residual value from the cost of the machine and then dividing it by the estimated life in units of activity.

Depreciation per unit = (Cost - Residual Value) / Estimated life in units of activity

In this case, the depreciation per unit would be:

Depreciation per unit = ($65,233 - $5,023) / 14,713 hours = $4.02 per hour

Now we can calculate the depreciation for the second full year, during which the machine was used 3,119 hours:

Depreciation for the second full year = Depreciation per unit * Number of hours used

Depreciation for the second full year = $4.02 per hour * 3,119 hours = $12,562.38