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 five years or 20,000 operating hours, is $21,375 by the units-of-activity method during a period when the asset was used for 4,500 hours.

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Quizplus · Accepted Answer

The depreciation expense using the units-of-activity method is calculated based on the actual usage of the asset. The formula is: [(Cost - Residual Value) / Total Estimated Usage] * Actual Usage. So, for an asset costing $95,000 with a residual value of $5,000 and a total estimated usage of 20,000 hours, the depreciation per hour is ($95,000 - $5,000) / 20,000 = $4.50 per hour. For 4,500 hours of usage, the depreciation expense would be 4,500 hours * $4.50/hour = $20,250, not $21,375.

The Amount of Depreciation Expense for a Fixed Asset Costing