On January 2, 2019, Konrad Corporation acquired equipment for . The estimated life of the equipment is 5 years or hours. The estimated residual value is . If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2020, assuming that during this period, the asset was used hours?

The question is incomplete. The complete question is,

On January 2, 2019, Konrad Corporation acquired equipment for $500,000. The estimated life of the equipment is 5 years or 18,000 hours. The estimated residual value is $14,000. If Konrad Corporation uses the units of production method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2020, assuming that during this period, the asset was used 6,000 hours?

A. $166,667

B. $97,200

C. $162,000

D. $171,333

The depreciation expense for the year is $162000. Thus, option C is the correct answer

Explanation:

The depreciation expense is the systematic allocation of the cost of the asset over its estimated useful life. The depreciation can be calculated using various methods. Under the units of production method, the depreciation expense for the period is calculated using the following formula,

Depreciation expense = [(Cost - Residual value) / Total estimated production units] * Units produced in a particular period

Depreciation expense = [(500000 - 14000) / 18000] * 6000

Depreciation expense = $162000

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return