Perdue Company purchased equipment on April 1 for $61,290. The equipment was expected to have a useful life of 3 years, or 5,940 operating hours, and a residual value of $1,890. The equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 hours in Year 4.

Calculate the depreciation expense for each year using the units-of-production method.

Question

19-09-2024
Business

High School

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Perdue Company purchased equipment on April 1 for $61,290. The equipment was expected to have a useful life of 3 years, or 5,940 operating hours, and a residual value of $1,890. The equipment was used for 1,100 hours during Year 1, 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 hours in Year 4.

Calculate the depreciation expense for each year using the units-of-production method.

Answer :

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shardiksh890 shardiksh890 · Answer 1 · 2025-01-07T14:02:41-05:00

Perdue Company purchased equipment with a useful life of 3 years, a residual value of $1,890, and an initial cost of $61,290. The equipment was used for varying hours over four years.

Perdue Company's equipment has a useful life of 3 years, meaning it is expected to be operational for that period. The equipment was purchased for $61,290, and it has a residual value of $1,890, which is the estimated value at the end of its useful life.

Over the course of four years, the equipment was used for different durations. In Year 1, it was used for 1,100 hours, followed by 2,100 hours in Year 2, 1,800 hours in Year 3, and 940 hours in Year 4. These figures indicate the actual usage of the equipment during each respective year.

The information provided allows for the calculation of the equipment's depreciation expense using various methods, such as straight-line depreciation or units-of-production depreciation. By applying the appropriate depreciation method, the company can allocate the cost of the equipment over its useful life and determine its annual depreciation expense. The depreciation expense helps in accurately reflecting the equipment's wear and tear and its declining value over time.

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