ray construction purchased a concrete mixer on august 1 20X5. company officials

Question

ray construction purchased a concrete mixer on august 1 20X5. company officials revealed the following information regarding this asset and its acquisition: purchase price: 126,000, residual value: 18,000, estimated useful life: 10 years, estimated service hours: 38,000, estimated production in units: 500,000 yards, actual hours used 20X5: 5,225, and actual 20X5 production: 77,000 yards. A) calculate depreciation for 20X5 and 20X6 assuming the company uses the straight-line method. B) calculate depreciation for 20X5 using: 1. service hours 2. units of production

Explanation / Answer

Hi, Please find the answer as follows: Part A: 2005 = (126000 - 18000)/10 = 10800 * 5/12 = 4500 (assuming books are closed on 31st Dec every year) 2006 = 10800 Part B: Service hours =126000*5225/38000 = 17325 Units of production = 126000*77000/500000 = 19404 Thanks, Aman

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