Question

On January 2, 2019. Konrad Corporation acquired equipment for $500,000. The estimated life of the equipment is 5 years or 18,000 hours. The estimated residual value is $14,000. If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2020, assuming that during this period, the asset was used 6,000 hours? O A. $97,200 O B. $166,667 OC. $171,333 OD. $162,000 point

Answer 1

depreciation expense per hour = (cost of equipment - estimated salvage value) / total hours during equipment's life

depreciation expense per hour = ($500,000 - $14,000) / 18,000

depreciation expense per hour = $486,000 / 18,000

depreciation expense per hour = $27 per hour

depreciation expense for year ended December 31, 2020 = depreciation expense per hour * hours used during the year

depreciation expense for year ended December 31, 2020 = $27 * 6,000

depreciation expense for year ended December 31, 2020 = $162,000

hence, debit to

depreciation expense for year ended December 31, 2020 shall be $162,000

hence, the correct answer is D. $162,000