A company paid $517,000 to purchase equipment and $16,700 to have the equipment delivered to and installed in the company's production facilities. The equipment is expected to be used a total of 29,700 hours throughout its estimated useful life of seven years. The estimated residual value of the equipment is $6,700. The company began using the equipment on May 1, 2018. The company has an October 31, 2018 year-end. It used the equipment for a total of 12,900 hours between May 1 and October 31, 2018. Using the units-of-production method, what amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2018?

Using the units-of-production method, the amount of depreciation expense would the company report in the income statement prepared for the year-ended October 31, 2018 = $ 228899

Explanation:

Given

Acquisition Cost of Equipment = $ 517,000 + $ 16700 = $ 533,700

Total units of production = 29,700 hours

Residual Value = $ 6700

Units of Production = 12,900 hours

Formula:

Depreciation per unit = (Cost - Salvage value) / Total units of production * Units of Production

Depreciation per unit = ($ 533,700 - 6700 / 29700) * 12900

Depreciation per unit = ($ 52,7000 / 29700) * 12900

Depreciation per unit = (17.744) * 12900

Depreciation per unit = 228898.98 = $ 228899

As units of production are given we do not need to calculate it for half year. The depreciation is calculated for units of production.