Question

A diesel-powered tractor with a cost of $112,000 and estimated residual value of $8,000 is expected to have a useful operating life of 50,000 hours. During April, the tractor was operated 200 hours. Determine the depreciation for the month. If required, carry out any division to two decimal places.

Answer 1

Depreciation expense = [Cost - residual value] * Number of hours operated during the period / Total Expected Operating hours over the life

Total Expected Operating hours over the life = 50,000 hours

Number of hours operated during the period = 200 hours

Depreciation expense = [$112,000 - $8,000] * 200 hours / 50,000 hours

Depreciation expense = $104,000 * 200 / 50,000

Depreciation expense = $416

So, Depreciation expense for the month is $416