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Equipment has a units-of-production rate of $3.00 per machine hour. It is used 2,100 hours in year 1 and 2,300 hours in year 2. What is the depreciation charge for year 2?
A$6,300
B$13,200
C$6,900
D$6,600
Answer & Solution
Correct answer: C. $6,900
1. Units-of-production charge = rate × hours used in the year.
2. Year 2 hours used = 2,300.
3. Charge $= \$3.00 \times 2{,}300 = \$6{,}900$.
4. Option A is the year-1 charge (2,100 hours); B is cumulative depreciation after two years.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.5.2 "Units of Production Method", p.156_
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