A loader cost $132,000, has a $12,000 salvage value, and is expected to operate for 5,000 hours. What depreciation rate per operating hour should be used?
Correct Answer
B) $24.00 per hr
Depreciable cost is $120,000. Dividing by 5,000 hours gives $24.00 per hour.
Why This Is the Correct Answer
Depreciable cost is $120,000. Dividing by 5,000 hours gives $24.00 per hour.
Why the Other Options Are Wrong
Option A: $22.00 per hr
$22.00 per hr is below the supported result for hourly equipment depreciation; it likely skips a premium-pay or employer-cost component.
Option C: $26.40 per hr
$26.40 per hr is above the supported result for hourly equipment depreciation; it likely pays the wrong premium tier or counts the same hours twice.
Option D: $28.80 per hr
$28.80 per hr is above the supported result for hourly equipment depreciation; it likely pays the wrong premium tier or counts the same hours twice.
Memory Technique
Who controlled depreciable, who paid cost, where is the Manager Allocates record?
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Two, Equipment Records, Depreciation and Depreciation Methods; use the job ledger figures in the stem and recompute the same accounting measure.
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