Question

On January 1, the Matthews Band pays $66,600 for sound equipment. The band estimates it will use this equipment for five years and perform 200 concerts. It estimates that after five years it can sell the equipment for $2,000. During the first year, the band performs 55 concerts. Compute the first-year depreciation using the units-of-production method.

Answer 1

Answer:

Annual depreciation= $17,765

Explanation:

Giving the following information:

Original cost= $66,600

Number of units= 200

Salvage value= $2,000

During the first year, the band performs 55 concerts.

To calculate the annual depreciation under the units-of- production method, we need to use the following formula:

Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units operated

Annual depreciation= [(66,600 - 2,000)/200]*55

Annual depreciation= $17,765