The amount of depreciation expense for a fixed asset costing $95,000, with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours, is $21,375 by the units-of-production method during a period when the asset was used for 4,500 hours.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on actual usage. The depreciation per hour is ($95,000 - $5,000) / 20,000 hours = $4.50 per hour. For 4,500 hours, the depreciation expense is 4,500 hours * $4.50/hour = $20,250, not $21,375.

The Amount of Depreciation Expense for a Fixed Asset Costing