On January 1, 2017, Bushong Company purchased equipment at a cost of $12,600. The equipment had an estimated useful life of 6 years or 30,000 hours. The equipment will have a $1,200 salvage value at the end of its life. The equipment was used 6,500 hours in 2017. The depreciation expense for the year ending December 31, 2017, using the units-of-production method would be a.$2,470. b.$2,730. c.$3,800. d.$6,500.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 1, 2017, Bushong Company purchased equipment at a cost of $12,600. The equipment had an estimated useful life of 6 years or 30,000 hours. The equipment will have a $1,200 salvage value at the end of its life. The equipment was used 6,500 hours in 2017. The
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