High School

On January 1, Busy Beaver bought a new industrial lathe for $210,000. It expects to use the lathe for 10,000 hours over the next 5 years and then sell it for $10,000. Busy Beaver used the lathe for 2,000 hours in its 1st year and 2,500 hours in its 2nd year.

Accumulated Depreciation at December 31 of the 2nd year, using units-of-production, equals ______.

Answer :

The accumulated depreciation at December 31 of the 2nd year, using units-of-production, is $20 per hour x 4,500 hours = $90,000.To calculate the accumulated depreciation using units-of-production, we need to determine the depreciation per hour.

The total depreciation of the lathe over its useful life can be calculated as the difference between its initial cost and the expected salvage value. In this case, the difference is $210,000 - $10,000 = $200,000.

Next, we divide the total depreciation by the total expected hours of use over the useful life of the lathe. In this case, it's $200,000 / 10,000 hours = $20 per hour.

Now, we can calculate the accumulated depreciation at the end of the second year. The lathe was used for a total of 2,000 + 2,500 = 4,500 hours in the first two years.

Therefore, the accumulated depreciation at December 31 of the 2nd year, using units-of-production, is $20 per hour x 4,500 hours = $90,000.

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