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On January 1, 2022, Anvil Corp.purchased equipment for $60,000.It was expected to last 5 years, after which it will be sold for $5,000.It is expected to be used for a total of 10,000 machine hours, and was used for 750 hours during the year ended December 31, 2022.
-The depreciation expense for 2022 using the units-of-production method will be
A)$4,125.
B)$11,000.
C)$4,500.
D)$12,250.

Question

Use the following information for questions 
On January 1, 2022, Anvil Corp.purchased equipment for $60,000.It was expected to last 5 years, after which it will be sold for $5,000.It is expected to be used for a total of 10,000 machine hours, and was used for 750 hours during the year ended December 31, 2022.
-The depreciation expense for 2022 using the units-of-production method will be
A)$4,125.
B)$11,000.
C)$4,500.
D)$12,250.

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on the actual usage of the asset. The cost minus the salvage value ($60,000 - $5,000 = $55,000) is divided by the total expected usage (10,000 hours) to find the depreciation per hour, which is $5.50 per hour. For 750 hours of use, the depreciation expense is 750 hours * $5.50/hour = $4,125.

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