EX 10-7 Depreciation by units-of-activity method

A diesel-powered tractor with a cost of $90,000 and estimated residual value of $15,000 is expected to have a useful operating life of 30,000 hours. During April, the tractor was operated 120 hours. Determine the depreciation for the month.


Answer:
($90,000 - $15,000)/30,000 hours = $2.50 depreciation per hour


120 hours at $2.50 = $300 depreciation for April