Question

Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the first year using the units-of-activity method of depreciation assuming the generator was used for 1,040 hours.

Answer 1

2080 dollars

Step-by-step explanation:

Given that Cardinal Industries purchased a generator that cost $11,000

cost of generator = 11000

Estimated life = 5 years

Residual value =1000

Hours =5000

Depreciation per unit hour = (Cost - residual value)/total lifetime hours

=
`(11000-1000)/(5000) \\=2`

For first year the generator was used for 1,040 hours.

Hence depreciation to be charged in I year

=
`1040(2)\\=2080`

answer is 2080 dollars.