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 the next 5 years and then sell it for $10,000. Busy Beaver used the lathe for 2,000 hours in 2018 and 2,500 hours in 2019. Accumulated Depreciation at December 31, 2019, using units-of-production, equals ______.

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andromache andromache · Answer 1 · 2019-12-05T05:07:10+01:00

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