Question

on march 4th, desert company purchased a depreciable asset for $1,174,339. the estimated salvage value is $61,766, and the estimated useful life is 10,000 hours. desert used the asset for 1,498 hours this year. the activity method will be used for depreciation. what is the depreciation expense desert will record this year for this asset?

Answer 1

The depreciation expense for Desert Company's asset for the year, calculated using the activity method, is $166,709.88. This is obtained by determining the depreciation per hour and then multiplying it by the actual hours used during the year.

Step-by-step explanation:

To calculate the depreciation expense for Desert Company's depreciable asset using the activity method, we first need to establish the depreciation per hour, which is done by subtracting the estimated salvage value from the cost and then dividing by the estimated useful life in hours. The cost of the asset is $1,174,339, the salvage value is $61,766, and the useful life is 10,000 hours. The formula will be: (Cost - Salvage Value) / Estimated Useful Life in Hours.

So the calculation will be: ($1,174,339 - $61,766) / 10,000 hours = $1,112,573 / 10,000 hours = $111.26 per hour. Then you multiply the per-hour depreciation by the number of hours the asset was used during the year: $111.26 x 1,498 hours = $166,709.88. Therefore, the depreciation expense recorded for this year will be $166,709.88.