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22 December, 10:55

A diesel-powered generator with a cost of $72 comma 000 is expected to have a useful operating life of 60 comma 000 hours. The expected salvage value of this generator is $7 comma 200. In its first operating year, the generator was operated for 4 comma 900 hours. Determine the depreciation for the year.

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  1. 22 December, 12:14
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    Annual depreciation = $5,292

    Explanation:

    Giving the following information:

    A diesel-powered generator with a cost of $72,000 is expected to have a useful operating life of 60,000 hours. The expected salvage value of this generator is $7,200. In its first operating year, the generator was operated for 4,900 hours.

    I will calculate the depreciation using the useful life method:

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

    Annual depreciation = [ (72,000 - 7,200) / 60,000]*4,900 = $5,292
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