Muggsy Bogues Company purchased equipment for $253,780 on October 1, 2014. It is

Question

Muggsy Bogues Company purchased equipment for $253,780 on October 1, 2014. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $18,960. Estimated production is 39,800 units and estimated working hours are 19,800. During 2014, Bogues uses the equipment for 550 hours and the equipment produces 1,000 units.

Compute depreciation expense under each of the following methods. Bogues is on a calendar-year basis ending December 31.

(a) Straight-line method for 2014 (Round answer to 0 decimal places, e.g. 45,892.) $

(b) Activity method (units of output) for 2014 (Round rate per unit to 2 decimal places, e.g. 5.35 and final answer to 0 decimal places, e.g. 45,892.) $

(c) Activity method (working hours) for 2014 (Round rate per hour to 2 decimal places, e.g. 5.35 and final answer to 0 decimal places, e.g. 45,892.) $

(d) Sum-of-the-years'-digits method for 2016 (Round answer to 0 decimal places, e.g. 45,892.) $

(e) Double-declining-balance method for 2015 (Round answer to 0 decimal places, e.g. 45,892.) $

Explanation / Answer

Calculation of Depreciation Depreciation Cost- Salvage/ Life (253780-18960)/8 $29,353 As the asset is used for less than 180 days depreciation will be charged for 180 days as per income tax Depreciation 29353/2 $14,676 b) Activity Method Depreciation ( Cost- salvage)*Units/ Estimated Total units 234820*1000/39800 $5,900 c) Working Hours Depreciation ( Cost- Salvage)* Hours/ Estimated Total Hours 234820*550/19800 $6,523

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