Final answer:
The depreciation expense for 2021 using the units-of-activity method for the factory machine is $30,000. This is calculated by determining that the cost per unit of activity (hour) is $7.50 and multiplying it by the actual usage of 4,000 hours.
Step-by-step explanation:
The student's question involves calculating the depreciation expense of a factory machine for the year 2021 using the units-of-activity method of depreciation. The cost of the machine is $375,000 with a salvage value of $75,000 at the end of its 5-year useful life. It is estimated that the machine will run for 40,000 hours over those 5 years. For the year 2021, the machine was used for 4,000 hours.
Using the units-of-activity method, first, we find the depreciable cost which is the cost of the machine minus the salvage value. The depreciable cost is $375,000 - $75,000 = $300,000. To find the depreciation per hour, we divide the depreciable cost by the total estimated usage in hours: $300,000 / 40,000 hours = $7.50 per hour. Since the machine was used for 4,000 hours in 2021, the depreciation expense for 2021 is 4,000 hours * $7.50 per hour = $30,000.