A piece of machinery has a cost basis of $50,000. Its salvage value will be $5,000 after 9,000 hours of operation. With units-of-production depreciation, what is the allowable depreciation rate per hour? What is the book value after 4,000 hours of operation?

Depreciable rate = $5 per hour

Annual depreciation = $20,000

Explanation:

Giving the following information:

A piece of machinery has a cost basis of $50,000. Its salvage value will be $5,000 after 9,000 hours of operation.

Using the units of production method, we need to use the following formula for each year:

Annual depreciation = [ (original cost - salvage value) / useful life of production in hours]*hours operated

Depreciable rate = [ (50,000 - 5,000) / 9,000 = $5 per hour

Annual depreciation = 5*4,000 = $20,000