IFA55 – Units-of-Production Depreciation – Intermediate Accounting

Download the Workbook: http://www.tonybell.com Unlock 100+ Members Accounting Tutorials: https://www.youtube.com/channel/UCNFClg6mzfZ5ixpuH9c7f1A/join In This Video: We continue with Part B of Problem 11-1A, shifting our focus to the Units-of-Production (or Units-of-Activity) depreciation method. Using the same Martinez Construction concrete mixer, we calculate the depreciation rate per operating hour based on the $95,000 capitalized cost, the $11,000 residual value, and the estimated 120,000 total productive hours. We then apply this rate to the actual hours used each year from 2031 through 2036 to determine the annual depreciation expense. Crucially, we discuss why the April 1 purchase date does not require us to prorate the first year's expense under this specific method, and we watch out for the ceiling limit in the final year to ensure we don't depreciate below the residual value. Module Overview (IFA53–IFA61): This module explores the systematic allocation of asset costs and the rules for write-downs. We will examine the major depreciation methods (Straight-Line, Declining Balance, and Units-of-Production), handle partial-year depreciation, and navigate changes in accounting estimates. We will also dive into the specific calculations required for depleting natural resources and walk step-by-step through the strict testing rules and journal entries for asset impairment.