We appreciate your visit to On January 1 2018 Busy Beaver bought a new industrial lathe for 210 000 It expects to use the lathe for 10 000 hours over. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
Answer:
$90,000
Explanation:
For computing the accumulated depreciation, first we have to determine the depreciation expense which is shown below:
= (Original cost - residual value) ÷ (estimated production)
= ($210,000 - $10,000) ÷ ($10,000 hours)
= ($200,000) ÷ ($10,000 hours)
= $20
Now for the first year, it would be
= Production hours in first year × depreciation per hours
= 2,000 hours × $20
= $40,000
And, for the second year,
= Production hours in second year × depreciation per hours
= 2,500 hours × $20
= $50,000
So, the accumulated depreciation would be
= $40,000 + $50,000
= $90,000
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Final answer:
We first need to find the depreciable cost, which is $200,000. Then, calculate depreciation per unit as $20 per hour. After determining the total hours used for 2018 and 2019 (4,500 hours), we find the accumulated depreciation to be $90,000.
Explanation:
To calculate the accumulated depreciation, first find out the depreciable cost, which is the acquisition cost minus the salvage value. In this case, the cost of the lathe is $210,000 and the salvage value is $10,000. Therefore, the depreciable cost = $210,000 - $10,000 = $200,000. Then, to find the depreciation per unit, divide the depreciable cost by the total expected use of the asset, in this case, 10,000 hours. Thus, depreciation per unit = $200,000 / 10,000 hours = $20 per hour. As Busy Beaver used the lathe for 2,000 hours in 2018 and 2,500 hours in 2019, the total hours of use over the two years is 2,000 + 2,500 = 4,500 hours. Therefore, the accumulated depreciation at December 31, 2019 = 4,500 hours * $20/hour = $90,000.
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