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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Utica Machinery Company purchases an asset for $1,200,000. After the machine has been used for 25,000 hours, the company expects to sell the asset for $150,000. What is the depreciation rate per hour based on activity?

To determine

Compute the depreciation rate per hour of Company U based on the activity method.

Explanation

Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.

Compute the depreciation rate per hour of Company U based on the activity method as follows:

Depreciation rate per hour = Cost of equipment Residual value

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