A machine with a cost of $120,000 has an estimated residual value of $15,000 and an estimated life of five years or 15,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?
A) $5,000
B) $35,000
C) $21,000
D) $45,000

Question

Quizplus · Accepted Answer

The depreciation per hour is calculated as (Cost - Residual Value) / Total Estimated Hours = ($120,000 - $15,000) / 15,000 hours = $7 per hour. For 5,000 hours in the second year, the depreciation is 5,000 hours * $7/hour = $35,000.

A Machine with a Cost of $120,000 Has an Estimated