Question

Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated to be good for 5,000 hours. Compute the depreciation expense for the first year using the units-of-activity method of depreciation if the generator was used for 1,040 hours.

Answer 1

$2080

Step-by-step explanation:

Given: Cost of generator= $11000.

Residual value= $1000.

Estimated life of generator= 5000 hours.

Actual activity performed during the period= 1040 hours.

Now, finding the depreciation expense for the first year using the units-of-activity method.

Formula;
`Depreciation\ expense= ((cost- residual\ value))/(Total\ estimated\ life\ time\ activity) * actual\ activity\ performed`

⇒ Depreciation expense=
`((11000-1000))/(5000) * 1040`

Opening parenthesis

⇒ Depreciation expense=
`(10000)/(5000) * 1040`

⇒ Depreciation expense=
`2 * 1040 = \$ 2080`

Hence, the depreciation expense for the first year using the units-of-activity method of depreciation is $2080.