Question

On July 1, 20X1, Georgia Inc., which uses UOP depreciation, purchases a machine for $16,000; the company estimates that the machine will have a useful life of 15,000 machine hours and a salvage value of $1,000. You are given the following usage data: 20X1 3,000 hours 20X2 2,200 hours 20X3 6,170 hours 20X4 5,300 hours Depreciation expense on the machine for 20X1 is:

a. $1,600
b. $3,000
c. $1,500
d. $3,200
e. $16,000

Answer 1

Annual depreciation= $3,000

Step-by-step explanation:

Giving the following information:

Purchase price= $16,000

Useful life= 15,000 machine hours

Salvage value= $1,000

Machine hours 20X1= 3,000

To calculate the depreciation expense for 20X1, we need to use the following formula:

Annual depreciation= [(original cost - salvage value)/useful life of production in hours]*hours operated

Annual depreciation= [(16,000 - 1,000) / 15,000]* 3,000

Annual depreciation= $3,000