Question

Novak Company purchased a new machine on October 1, 2020, at a cost of $110,100. The company estimated that the machine will have a salvage value of $10,100. The machine is expected to be used for 10,000 working hours during its 4-year life.

(b)

Compute the depreciation expense under units-of-activity for 2020, assuming machine usage was 1,610 hours. (Round intermediate calculations to 1 decimal place, e.g.10.1 and final answer to 0 decimal places, e.g. 2,125.)

Depreciation expense $

Answer 1

Cost of Machine	$   110,100
Less: Salvage value	$   (10,100)
Depreciable value	$   100,000
Expected working hours	10,000
Depreciation rate per hour ($100,000/10,000)	$             10
Depreciation expense for 2020 ($10*1,610)	$     16,100

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