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Units of Productivity Method?
Alpha Co. purchased a machine on 1/2/08 for $750,000. Calculate the annual depreciation expense for each year of the machines life(estimated at 5 years or 20,000 hours) with a salvage value of $75,000. During the machine's 5-year life it's hourly usage was: 3000,4000,6000,5000 and 4000 hours
MY ISSUE IS THE HOURS ADD UP TO 22,000 HOURS! I'M CONFUSED!!! PLEASE HELP!!!!
1 Answer
- SandyLv 71 decade agoFavorite Answer
You only know the 22,000 hrs with hindsight. When you were calculating depn for the 1st, 2nd, 3rd and 4th yrs, you don't know about the 22k hrs, so you depreciate the depreciable cost ($750,000 less $75,000) by 3,000/20,000, 4,000/20,000, 6,000/20,000 and 5,000/20,000 respectively, then in the 5th yr you just charge enuf depn to take the accum depn up to $675,000.
