Equipment acquired at the beginning of the year at a cost of $180,000 has an estimated residual value of $10,000, has an estimated useful life of 40,000 hours, and was operated 3,600 hours during the year

Accounting Jan 31, 2021

Equipment acquired at the beginning of the year at a cost of $180,000 has an estimated residual value of $10,000, has an estimated useful life of 40,000 hours, and was operated 3,600 hours during the year. Determine

(b) the depreciation rate,

Expert Solution

Computation of Depreciation Rate:

Depreciable Cost = Cost of Equipment - Residual Value

= $180,000-$10,000

= $170,000

Depreciation Rate = Depreciable Cost/Estimated Useful Life of Hours

= $170,000/40,000 hours

= $4.25 per hour

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