A tractor acquired at a cost of $275,000 has an estimated residual value of $39,000, has an estimated useful life of 40,000 hours, and was operated 2,660 hours during the year. Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-output depreciation for the year.
Answer:
a. $236,000 ($275,000 – $39,000)
b. $5.90 per hour ($236,000 ÷ 40,000 hours)
c. $15,694 (2,660 hours × $5.90)