PE 10-3A Units-of-production depreciation

A tractor acquired at a cost of $315,000 has an estimated residual value of $27,000, has an estimated useful life of 90,000 hours, and was operated 3,700 hours during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-production depreciation for the year.

Answer:
a. $288,000 ($315,000 – $27,000)
b. $3.20 per hour ($288,000/90,000 hours)
c. $11,840 (3,700 hours × $3.20) 

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