On January 1, year 1, Clem Corp. purchased equipment for $160,000. The equipment has a residual value of $10,000, and has a life of 100,000 hours. Clem uses the activity-based method of depreciation. In year 1, Clem used the machine 2,000 hours, and in year 2, Clem used the machine 3,000 hours. What is the depreciation expense for year 2?

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2021-12-14T12:26:23+01:00

Based on the information given the depreciation expense for year 2 is $4,500.

First step is to calculate depreciation rate per unit

Depreciation rate per unit = ($160,000 - $10,000)/100,000 hours

Depreciation rate per unit=$150,000/100,000 hours

Depreciation rate per unit = $1.50 per machine hour

Second step is to calculate Year 2 depreciation

Year 2 depreciation=3,000 hours x $1.50

Year 2 depreciation= $4,500

Inconclusion the depreciation expense for year 2 is $4,500.

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