Question

A factory machine was purchased for $375,000 on January 1, 2015. It was estimated that it would have a $75,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2015. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2015 would be

Answer 1

the depreciation expense for the year 2015 is $30,000

Step-by-step explanation:

The computation of the depreciation expense for the year 2015 is shown below:

Depreciation Expense is

= Cost - salvage value

= $375,000 - $75,000

= $300,000

Now

Depreciation Expense for 2015 is

= (Actual hours in 2021 ÷ Total hours) Depreciation

= (4,000 ÷ 40,000) × $300,000

= $30,000

Hence, the depreciation expense for the year 2015 is $30,000